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 in 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).
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.
Determining the Price of Minerals: A Transfer Pricing Framework and Application to Bauxite
Following the public consultation launched earlier in 2023, the OECD and IGF released two toolkits on 6 November 2023. The first toolkit, Determining the Price of Minerals: A Transfer Pricing Framework, provides a practical framework for developing countries to accurately delineate the transaction and price mineral sales on an arm's length basis. The second toolkit, Determining the Price of Minerals: Application to Bauxite, applies this transfer pricing framework to a specific mineral (bauxite).
Determining the Price of Minerals: Application to Lithium
In addition, as part of the ongoing work of the OECD/IGF partnership on BEPS in the mining programme, the OECD and IGF are seeking public comments on an additional toolkit that applies the transfer pricing framework as documented in Determining the Price of Minerals: A Transfer Pricing Framework to a specific mineral (lithium). Interested parties are invited to send their comments no later than 2 February 2024 by e-mail to CTP.BEPS@oecd.org in Word format (in order to facilitate their distribution to government officials).
Read the full call for input.
Policy and administrative guidance on complex topics
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.
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.
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 in recovering lost taxes arising from BEPS, closing the tax gap in the extractive sector and building 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:
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, an Analyst in the Extractive Industries Branch of 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.