Fence of enclosure

"Circular fence" means that when a company has several taxable items, it needs to calculate the income tax for each item separately. For example, if a company operates two mines in an area and the tax law stipulates that a circular fence should be set up, then the cost and income of one mine cannot be combined with the other mine to calculate the company's tax payment. Each mine should be taxed as an independent unit.

Most countries surveyed have not set up tax ring fences, which means that many countries allow a company to combine the cost and income of all business activities, regardless of whether such business activities belong to mining activities or not. Generally speaking, countries with ring fence systems are mainly limited to the following situations. First, when the tax system applicable to one mine is different from that of another mine, most of them set up circular fences. In some countries, a unique tax mechanism is determined for each large-scale project through negotiation. For example, Indonesia. The mines produced during the first generation of work contracts are different from those operated under the seventh generation of work contracts in terms of taxation. It is not easy for the administrative department to combine the accounts of the two types of mines to determine the total tax payment, or for the government's "tax law enforcement" office to better understand this kind of account combination.

The second situation that needs to set up a circular fence is that the state has implemented a certain tax stability policy. In this case, investors enjoy a certain fixed tax rate or preferential tax measures, and are not affected by the subsequent revision of tax rates or preferential measures. Under the condition that each project enjoys different tax rates and different preferential measures, it is also a difficult problem for the government to allow investors to merge the costs and benefits of different mines.

The third situation is that some countries levy resource lease tax on tax design. This tax is based on the recovered economic rent (economic surplus) and is caused by the inherent quality difference of mines. In this way, high-profit and high-grade mines should pay more taxes than low-profit and low-grade mines. If the accounts of the two mines are merged, the basic assumption of resource lease tax will be weakened. Table 16 lists whether some countries (regions) set up circular fences.

Table 16 Fence Policies of Some Countries (Regions)