The IGF recently partnered with the Australian government to deliver training on transfer pricing in the mining sector to the Government of Tanzania.
The aim of the training is to equip the Government of Tanzania with the knowledge and skills needed to identify and evaluate transfer pricing risks in the mining sector. The training focuses on offshore marketing arrangements, inter-company debt and corporate services.
The training is based on the Toolkit for Transfer Pricing Risk Assessment in the African Mining Industry, published by Deutsche Gesellschaft für Internationale Zusammenarbeit GmbH (GIZ) and the African Tax Administration Forum (ATAF).
Transfer pricing is the process of setting the price of a transaction between two entities that are part of the same multinational corporation (MNC). For example, a U.K.-based company might provide administrative and advisory services to its Ghana-based subsidiary, charging a fee for the service.
Transfer pricing is a normal business practice, provided the terms and conditions of the controlled transaction are comparable to a transaction between unrelated parties. Transfer pricing can become abusive when the related parties attempt to distort the price to shift profits from a high-tax jurisdiction to low-tax jurisdiction to reduce their overall tax bill.
Between 1995 and 2014, the number of African countries with transfer pricing rules has grown by 600 per cent, according to Ernst & Young. However, evidence shows that few African tax authorities have the sector-specific expertise to detect and mitigate transfer pricing risks in the mining sector. Many tax authorities do not have close knowledge of the mining sector, which hinders their ability to distinguish between abusive versus standard industry practice. Risk assessment is critical for developing country tax authorities given the limited resources they have to audit taxpayers.
To request training on transfer pricing in mining, please contact Alexandra.email@example.com.
To learn more about how the IGF is providing practical advice and support to governments on all critical issues related to tax base erosion and profit shifting in the mining sector, please visit our project page.