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Part C: Fiscal Terms | 37. Non-Fiscal Incentives

Non-fiscal incentives typically refer to provisions that use non-monetary and/or in-kind benefits to encourage investment in specific sectors of a country’s economy. These benefits may be issued at the national level as well as at the local level, such as by state, province or other regional entities. For the mining sector, these incentives may include, but are not limited to, the following:

  • Administrative assistance such as “one stop shop” resources to support investors in the set up and running of businesses
  • Simplified licensing procedures (e.g. ability to submit forms online; fast track approvals process)
  • Technical assistance in the form of guidance on national regulatory frameworks
  • Subsidized training programs that improve human capacity, particularly where there is a shortage of qualified employees

As with fiscal incentives, the use of non-fiscal incentives must carefully consider the opportunities, costs and challenges that arise from offering these types of incentives to investors. Up front financial investment may be lower where incentives are derived from pre-existing programs or structures, but alternate costs also exist, such as higher administrative costs where dedicated resources have to be assigned to meet investor needs. Particularly, it is essential that incentives do not provide such an advantage to global investors that it creates a significant disadvantage to local investors.

When non-fiscal incentives are offered, they should aim to be (1) affordable, not significantly undermining a government’s revenue via direct and/or indirect cost; (2) transparently presented to investors; (3) simple, making it easy on both the investor and the government to access and determine eligibility for the incentive and (4) non-discretionary, to ensure a consistent regime that limits the possibility of bribery and corruption that can become intertwined with discretionary measures. Incentives should also be consistent with international best practice and should not contradict any other incentives a country offers to investors.

Ultimately, many non-fiscal incentives provide services that, when functional, serve to strengthen the overall investment climate of a country. These incentives, therefore, can offer a critical starting point in linking investor needs with a country’s long term strategic goals to promote business, allowing for a positive impact that extends beyond the mining sector.

37. Example 1:

Article [_]

(1) General non-fiscal incentives as provided for in [relevant investment legislation] shall apply to a mining right holder. The details of any such incentives if deemed applicable to the mining sector shall be addressed in the accompanying mining regulations.

(2) Incentives shall not be granted to a mining right holder where they have not previously been published in approved legislation.

Annotation

This suggested provision references the relevant investment legislation of a country that may already provide for general non-fiscal incentives that apply generally to investors and creates the framework for tailoring such incentives to the mining industry investors. Importantly, the provision restricts incentives to those that have been made available through the country’s legislative process, supporting a transparent and consistent regime around incentives.

37. Example 2:

Art. [_] Non- Fiscal incentives

A license holder shall be entitled to the following non- fiscal incentives:

(a) Assistance in securing local permits and licenses;

(b) Assistance in identifying office location and mining sites;

(c) Joint ventures and downstream service provider match-making

(d) Facilitated access to financial and technical assistance programs of the

[Country];

(e) Facilitated service connections with local utilities; or

(f) Any additional incentives made available must be published and approved by the [Legislative Body].

Annotation

Inspired by the Investment Incentives Code of the City of Naga, Philippines (1997), this example goes into more detail than the previous, outlining specific assistance and resources for license holders. This provision importantly gives room for additional incentives to be provided, but requires that these be subject to the approval of the country’s legislative body.