A brief history of time: Taxation and mineral production in developing countries

This paper investigates the impact of taxation on the lead time from discovery to production by estimating duration models. Using a dataset of 188 gold mines, covering 24 developing countries from 1950 to 2017, both parametric (Weibull), semi-parametric model (Cox model), and non-parametric (Kaplan-Meir estimate) are applied to determine the role of taxation. The study contributes to the literature by showing empirically that according to the level of corporate income tax and royalty, and the nature of the fiscal regime used by a country to capture its share of the revenues stemming from the mineral extraction, the first gold pour take place sooner or later mainly when the corporate income tax is greater than 35% and the royalty rate above 5%. Most importantly, it documents that a progressive mineral regime shortens the length of time as well as a low-tax regime. Lastly, the findings suggest also that increasing prices at the time of discovery and the geological quality of the deposit play a critical role in encouraging investors to come into production earlier.