Revenue allocation

Extractive sector revenue collected by the government is often distributed in a number of different ways and involves several different institutions.

Transparency in revenue allocations enables citizens to track whether the money from the extractive sector ends up in the national budget or is distributed to other funds or government entities.

The disclosure of information related to revenue allocations enables stakeholders to understand how revenues are recorded in the national and where applicable, subnational budgets, as well as track social expenditures by companies. 

Social expenditures by extractive companies

In addition to taxes levied by central, regional and local governments, extractive companies often make contributions to regional or local governments, communities, non-governmental organizations or other third parties in the areas where they operate. These transactions are interchangeably called “social expenditures”, “social payments”, or “social investments”. 

Social expenditures can take multiple forms. They may involve cash payments such as donations, grants or other types of cash transfers, the transfer of assets such as the construction of roads or schools, or the provision of services like training and health care. In some cases, these social expenditures are based on legal or contractual obligations. In other cases, companies make voluntary social contributions. 

Social payments - in-kind or cash - are a form of contribution from companies to a region or community and should be reflected as such. Often, communities do not know what companies contribute - or are obliged to pay by nature of their contracts. This can generate mistrust towards the companies and the government. It is thus important to publish the expectations and the actual amounts paid, or in-kind donation given to provide a more complete picture for all stakeholders involved.

What the EITI Standard requires

The EITI Standard includes provisions to ensure that the distribution of revenues from the extractive industries is clearly addressed. This ensures that citizens can “follow the money” from the oil, gas and mining sectors, and link EITI data to other public financial management reporting.