Production tax is a percentage taken from gold and raw materials at the moment they are collected from a building. It is paid in kind (the same gold or raw material that was produced) and goes to the state budget of the producer's country. Manufactured and energy products are not taxed.
Raising it fills the state budget with more gold and raw materials, but producers keep less of what they make, which can discourage production.
Lowering it lets producers keep more of their output and can encourage production, while the state budget collects less gold and raw materials.
This is a neutral explanation to help you decide — it doesn't favor either side.