There are many forms of more or less indirect tax which are substituted in different parts of the world for direct taxes. For instance, certain states in South America do not tax ores in the ground, but collect the revenue in the form of mining licenses or export taxes.
# GENERAL COMMENTS ON TAXATION OF MINERAL RESOURCES
There has been a noticeable tendency in recent years to regard mineral resources as a heritage of the people, to be held in trust, rather than as property to be acquired and managed solely for private interest. This tendency has been indicated by the adoption in various parts of the world of laws affecting rights to explore and acquire minerals on the public domain; laws relating to the right of eminent domain over minerals already alienated from the government; laws regulating the exploitation of minerals in the interests of conservation; laws relating to tariffs and other restrictions on the export of mineral commodities; and laws relating to taxation.
The feeling that mineral resources really do not belong in private hands has undoubtedly been an underlying factor in the imposition of heavy taxes. Contributing to this action also are the popular belief in the intrinsic bonanza values in mineral resources, the failure to recognize the large element of value which is put into such resources by human efforts, and the failure to realize that the social surplus in the aggregate is small. To some tax officials an ore is an ore, more or less regardless of situation, of conditions of mining, of the demand for the product, and of the time when the demand will allow the ore to be mined,—in short, more or less regardless of what the ore may be made to yield as a going business. In this way heavy taxes are sometimes imposed on mineral reserves, which are based on unwarrantably high appraisals of future possibilities, and which cannot be paid out of earnings.
Ultimately, a tax must be adjusted to the capacity of the mine to pay out of its earnings, and this capacity in turn is determined both by the physical characters of the ore and by the success with which it may be made available for consumption. This view of valuation for taxing purposes is sometimes opposed by mining men on the grounds that it taxes brains, skill, and initiative, and that it puts a premium on shiftless management. The same argument might be applied to the valuing of any business or profession. To the writer the argument is not sound, in that it fails to recognize the element of human energy in resource values. If value were to be confined solely to the intrinsic character of the ore itself, there would be required an almost impossible degree of discrimination on the part of taxing officials to dissociate this value from other considerations; and there would be required further the differentiation between efficient and inefficient management, which involves so many considerations that the conclusion would be worthless.
In the application of income taxes to mining operations, there is sometimes another tendency toward over-taxation in that the income is regarded as more or less permanent, and insufficient allowance is made for exhaustion of the mineral deposit. Under the United States income tax, mineral deposits are definitely recognized as wasting assets and this factor is allowed for; but in state income taxes and in England and other parts of the world, allowances for this purpose are small.
There is wide belief that heavy taxation of mineral resources, particularly on the ad valorem basis, retards exploration and prevents the development of the reserves which are necessary to stabilize the mineral industry. High taxes have undoubtedly had this effect in some cases, especially where taxes have been imposed on resources long prior to development; but, in the writer's view, this tendency in general has not