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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).

 

 Tools to Assist Developing Countries to Combat Profit Shifting in Mining

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Determining the Price of Minerals: A Transfer Pricing Framework

The OECD and in partnership IGF have recently released a mineral pricing framework document for public consultation.

As part of the ongoing work of the OECD/IGF partnership on BEPS in the mining program, the OECD and IGF are seeking public comments on two toolkits. The first toolkit provides a practical and meaningful framework for developing countries to accurately delineate the transaction and price mineral sales on an arm’s length basis. The second toolkit applies this transfer pricing framework to a specific mineral (bauxite). Interested parties are invited to send their comments separately on each of these documents no later than 14 July 2023 by e-mail to  [email protected] in Word format (in order to facilitate their distribution to government officials).

Read the full press release.

 

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. It is also available in French and Spanish. 

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)

Developing countries' revenue losses from tax base erosion and profit shifting (BEPS) is an estimated USD 200 billion annually, across all sectors.¹ With a long list of Sustainable Development Goals (SDGs) to finance, it is more important than ever that resource-rich developing country governments ensure existing and future mining projects contribute their full share to government budgets.

The OECD Centre for Tax Policy and Administration has partnered with the Intergovernmental Forum on Mining, Minerals, Metals and Sustainable Development (IGF) to deliver the BEPS in Mining Programme. Combining their respective mining and tax expertise, the OECD and IGF will equip resource-rich developing country governments with the knowledge, skills and tools to build and administer robust mining tax systems.

The programme aims to provide policy and administrative guidance to help navigate complex topics such as excessive interest deductions, tax incentives and monitoring the value of mineral exports.

 

2022 Online Training Course on International Taxation and the Extractives Sector

The OECD together with the IGF and our regional partners, ATAF and CIAT, will deliver another six-month-long online training course on international taxation and the mining industry which is comprised of eight modules, focusing on the most pressing international taxation issues in the mining sector. The training will touch on a range of BEPS issues in the mining sector including transfer pricing risks along the mining value chain (offshore marketing hubs, intercompany loans); verifying mineral product prices; double tax treaties; taxation of capital gains resulting from indirect off-shore transfers of mining assets and licences; tax incentives including fiscal stabilisation, particularly in the context of the OECD/G20's Pillar Two rules; and how mining fiscal policy and administrative design can exacerbate or limit potential international tax risks.

The OECD and IGF are committed to a whole-of-government approach to addressing critical mining revenue issues. As such, we will invite a delegation made up of representatives from the tax administration, ministry of finance, and ministry of mining from Latin America and the Caribbean, Africa and Asia-Pacific.

For more information, download the course brochure.

To know more about previous training programs, read the blog posts Building Government Capacity to Secure Mining’s Financial Benefits in Latin America and Meeting the Moment: Strengthening tax administration to raise mining revenue mobilization across Africa published in March 2022.

 

The Zambia Case Study - June 2020

The OECD in partnership with the IGF and regional partners has been working on the ground in resource-rich countries around the world to support developing countries recover lost taxes arising from BEPS, close the tax gap in the extractive sector and to build a sustainable tax system. Zambia has proven to be an excellent case study of tangible outcomes arising from the multilateral cooperation between the Zambia Revenue Authority (ZRA), the OECD, the African Tax Administration Forum (ATAF) and the IGF. The long-standing collaboration has helped the ZRA modernise its transfer pricing approaches and rules to address BEPS issues relating to base metal valuation.

 

The IGF and OECD also offer a range of implementation support for governments, including:

• Training and capacity building
• Legal and policy advisory services
• Experienced tax auditors to assist with mining tax audits via the joint OECD/UNDP Tax Inspectors Without Borders initiative.

 

BEPS in Mining Training Testimonials 

Claudia Vargas, Advisor to the General Commissioner, National Directorate of Taxes and Customs (DIAN), Colombia, describes her experience attending a training on International Tax Treaties in the Extractives Sector.	Galileo Solis, Transfer Pricing Auditor, Directorate General Revenue, Panama, describes his experience attending a 2021 regional training on tax base erosion and profit shifting (BEPS) in the mining sector.
Loide Hamutumwa, Lawyer, Namibian Receiver of Revenue, describes her experience attending a regional training on base erosion and profit shifting (BEPS) in the mining sector.	Bertha Soraya Vaca Ortiz, National Tax Control Expert, Internal Revenue Service, Ecuador, describes her experience attending a 2021 regional training on tax base erosion and profit shifting (BEPS) in the mining sector.
Ben Piu, Analyst in the Extractive Industries Branch Papua New Guinea's Department of Treasury, describes his experience attending a training on tax base erosion and profit shifting  (BEPS) in the mining sector.

 

Read more about our work in our brochure (FR/ES)

 

¹ Source: Intergovernmental Forum on Mining, Minerals, Metals and Sustainable Development (IGF)