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Resource Revenue Transparency

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Practice Advice on Ethics and Accountability

Resource Revenue Transparency (IMF)

Summary Advice: The IMF recommends several good practices of resource revenue transparency as the basis for voluntary compliance . The practices below groups fiscal transparency good practices according to four pillars.

Main Points:

I. Clarity of Roles and Responsibilities

A. Legal Framework for Resource Revenues

The government’s ownership of resources in the ground should be clearly established in law and the power to grant rights to explore, produce, and sell these resources should be well established in laws, regulations, and procedures that cover all stages of resource development.

B. Fiscal Regime

The government’s policy framework and legal basis for taxation or production sharing agreements with resource companies should be presented to the public clearly and comprehensively.

C. Authority over Revenue Flows and Borrowing

Fiscal authority over resource-related revenue and borrowing is clearly specified in the law. Legislation should require full disclosure of all resource-related revenue, loan receipts and liabilities, and asset holdings.

D. Equity Participation

Government involvement in the resource sector through equity participation should be fully disclosed and the implications explained to the public.

E. National Resource Companies

Ownership structures of national resource companies and their fiscal role vis-à-vis the resource sector ministry and the finance ministry should be clearly defined. Commercial responsibilities should be clearly distinguished from policy, regulatory, and social obligations.

F. Quasi-fiscal Activities (QFAs) of Resource Companies

Arrangements whereby international or national resource companies undertake social or environmental expenditure or provide subsidies to producers or consumers without explicit budget support should be clearly defined and described in the budget documentation.

G. Subnational Government and Resource Revenues

Arrangements to assign or share resource revenues between central and subnational levels of government should be well defined and explicitly reflect national fiscal policy and macroeconomic objectives.

II. Open Budget Processes

A. Fiscal Policy and Resource Revenues

The budget framework should incorporate a clear policy statement on the rate of exploitation of natural resources and the management of resource revenues, referring to the government’s overall fiscal and economic objectives, including long-term fiscal sustainability.

B. Fiscal Policy, Resource-related Funds and the Budget

Mechanisms for coordinating the operations of any funds established for resource revenue management with other fiscal activities should be clearly specified.

C. Operations of Resource-related Funds

Operational rules applied to resource-related funds should be clearly stated as part of an overall fiscal policy framework.

D. Fiscal Policy and Asset Management

The investment policies for assets accumulated through resource revenue savings should be clearly stated, including through a statement in the annual budget documents.

E. Accounting for Resource Revenues 2.2.1

The government accounting system or special fund arrangements should clearly identify all government resource revenue receipts and enable issuance of timely, comprehensive, and regular reports to the public, ideally as part of a comprehensive budget execution report. The reports should be based on a clear statement of the accounting basis (cash or accrual) and policies.

III. Public Availability of Information

A. Budget Documentation of Resource Revenues and Spending

All resource revenue-related transactions, including through resource funds, should be clearly identified, described, and reported in the budget process and final accounts documents.

B. Reporting on Company Resource Revenue Payments

Reports on government receipts of company resource revenue payments should be made publicly available as part of the government budget and accounting process.

C. Fiscal Balance

The (primary) non-resource fiscal balance should be presented in budget documents as an indicator of the macroeconomic impact and sustainability of fiscal policy, in addition to the overall balance and other relevant fiscal indicators.

D. Reporting on Resource-related Debt

The government’s published debt reports should identify any direct or indirect collateralization of future resource production, for instance through pre-commitment of production to lenders. All government contractual risks and obligations arising from such debt should be disclosed.

E. Reporting on Assets

All financial assets held by government domestically or abroad, including those arising from resource-related activities, should be fully disclosed in government financial statements.

F. Estimating Resource Asset Worth

Estimates of resource asset worth based on probable production streams and assumptions should be disclosed.

G. Reporting Contingent Liabilities and Quasi-fiscal Activities

Government contingent liabilities and the cost of resource company quasi-fiscal activities arising from resource-related contracts should be reported in budget accounts or other relevant documents in a form that helps assess fiscal risks and the full extent of fiscal activity.

H. Fiscal Risks

Risks associated with resource revenue, particularly price risks and contingent liabilities, should be explicitly considered in annual budget documents, and measures taken to address them should be explained and their performance monitored.

IV. Assurances of Integrity

A. Internal Control and Audit of Resource Revenues

Internal control and audit procedures for handling resource revenue receipts through government accounts or special fund arrangements and any spending of such receipts through special funds should be clearly described and disclosed to the public.

B. Tax Administration Openness

Tax administration should be conducted in a way to ensure that resource companies understand their obligations, entitlements, and rights. The scope for discretionary action by tax officials should be clearly defined in law and regulations, and the adequacy of sector skills and standard or sector-specific procedures should be open to review.

C. Oversight of Companies

International and national resource companies should comply fully with internationally accepted standards for accounting, auditing, and publication of accounts.

D. Oversight of Company/Government Revenue Flows

A national audit office or other independent organization should report regularly to parliament on the revenue flows between international and national companies and the government and on any discrepancies between different sets of data on these flows.

Source: IMF Guide on Resource Revenue Transparency (2007) IMF at (accessed 28 March 2013).]

Page Created By: Matthew Seddon on 28 March 2013. The content presented on this page is drawn directly from the source(s) cited above, and consists of direct quotations or close paraphrases. This material does not necessarily reflect the official view of the publishing organization.

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