Raising tax revenue is especially important for developing countries. Strong tax systems are central to financing development, and there is increased recognition of the importance of external support in building those systems.
While real progress has been made on increasing tax revenues in low income countries over the past two decades, in many countries revenue remains well below the levels needed to achieve the Sustainable Development Goals and secure robust and stable growth.
Like other sectors of the economy, there are tax base erosion risks in the mining sector that can hinder domestic resource mobilisation (DRM), particularly from the operations of multinational enterprises (MNEs).
Pricing Minerals Sold in an Intermediate Form
Profit shifting via the pricing of mineral products in transactions between related parties is of particular concern for many countries. For developing countries, profit shifting risks are elevated where revenue authorities are still building their sector specific and transfer pricing expertise.
As a response, the OECD led the development of material on mineral product pricing, published by the Platform for Collaboration on Tax in 2017 as a supplement to the Toolkit Addressing Difficulties in Accessing Comparables Data for Transfer Pricing Analyses.
Training on this toolkit is also available under the Global Relations Programme.
Co-operation with the Intergovernmental Forum on Mining, Minerals, Metals and Sustainable Development (IGF)
The OECD Centre for Tax Policy and Administration Secretariat has commenced a programme of co-operation with the IGF, as part of a wider effort to address some of the challenges developing countries are facing in raising revenue from their mining sectors. Under this co-operation, a series of products are under development. The tools provided below reflect a broad consensus between the OECD Centre for Tax Policy and Administration Secretariat and the IGF, but should not be regarded as the officially endorsed view of either organisation or of their member countries.
Limiting Excessive Interest Deductions by Mining MNEs
Another important avenue for international profit shifting by MNEs is the use of excessive interest deductions.
Building on BEPS Action 4, the OECD has developed a practice note under a programme of co-operation with the Intergovernmental Forum on Mining, Minerals, Metals and Sustainable Development (IGF), to help guide tax officials on how to strengthen their defences against this form of BEPS.
This practice note is part of a series of products expected in 2018 and beyond under this co-operation. It reflects a broad consensus between the OECD Centre for Tax Policy and Administration Secretariat and the IGF, but should not be regarded as the officially endorsed view of either organization or of their member countries.
Limiting the Base Erosion from Tax Incentives in Mining
Supplementing wider work undertaken by the Platform for Collaboration on Tax on tax incentives, IGF has led the development of a draft policy tool on the use of tax incentives in mining, examining the tax base erosion risks they can pose.
Monitoring the Value of Mineral Exports
Ensuring appropriate pricing of minerals relies on high-quality, accurate testing facilities and controls.
As part of the OECD-IGF co operation, IGF has published a draft policy tool to help governments choose the appropriate policy option for monitoring the value of mineral exports, considering the type of mineral, the risk of undervaluation, existing government capacities, and available budget. This draft publication is available at the IGF website.
Follow us @OECDtax