Background Paper for the Committee for Greenlandic Mineral Resources to the Benefit of Society

This paper considers the role of the public sector in future exploitation of non-renewable resources, especially minerals, in Greenland. The focus is on fiscal sustainability, principles for public sector involvement and the form of government take from mining activities. At present, the public budget in Greenland is nearly in balance, but at unchanged policies and standards public expenditures relative to GDP are bound to increase dramatically over the next decades due to population ageing. At the same time, the freezing of the block grant from Denmark implies a decrease in revenues relative to GDP. Hence, fiscal policy is quite far from being sustainable. Apart from a need for reforms, these facts also constrain the possible role of the public sector in future resource exploitation. In any case, the government should preferably adhere to strict principles when developing the mineral sector in Greenland. Furthermore, serious attention should be given to how to secure an appropriate government take from mineral activities. The paper discusses several types of taxes as well as financing models