BEPS | Tax Base Erosion and Profit Shifting in Mining

Tax base erosion and profit shifting (BEPS) in mining threatens the ability to achieve sustainable development.

This IGF/OECD program enables resource-rich countries to capture a fair share of the benefits of their non-renewable natural resources.

We work to:

Support government officials and other stakeholders to better understand mining tax law and how to address gaps in existing national and international tax rules in order to maximize revenues from mining for sustainable development.

Increase stakeholders’ capacity to detect and mitigate BEPS risks and practices in mining through training and advisory services.

Promote good governance in mining tax policy and administration.

Capacity Building

Local and international experts are available to offer technical assistance and training tailored to your needs and capacities.

Our highly qualified lawyers and fiscal specialists can also provide advice on drafting and implementing tax law relating to mining, including concession agreements.

We have also partnered with Tax Inspectors Without Borders to provide tax audit expertise and skills to developing country tax administrations.

Current Topics

The IGF/OECD program offers critical analysis, implementation tool kits and tailor-made capacity building and training focused on key BEPS in mining issues.

Fiscal Stabilization

Tax stabilization clauses remain highly controversial. This work stream seeks to find common ground on the possible roles, design and duration of such clauses.

Hedging

Hedging involves the setting of future-selling prices to ensure commercial predictability. If hedging contracts set artificially low sale prices, however, this can reduce taxable income for the host state.

International Tax Treaties

International tax treaties allocate where assets and income are taxed. We focus on how tax treaties impact the mining sector specifically and how resource-rich developing countries, in particular, should approach critical elements of such treaties.

Metals Streaming

Metals streaming involves mining companies selling a certain percentage of their production at a fixed cost to a financier in return for funds for mine development and construction. It can reduce the tax base of resource-producing countries.

Mineral Pricing

Government revenue from mining depends on mineral products being priced and measured accurately. We look at how governments can assess the value of what is mined in their countries and thus obtain the proper revenues.

Offshore Transfer of Mining Assets

When mining assets are sold through the sale of companies in jurisdictions other than where the assets are located, the mining country risks the loss of significant income that could have been taxed as capital gains.

Ring-Fencing

Ring-fencing is a technique governments can use to prevent or reduce tax revenue losses when profits generated in one project owned by a company are offset by losses made by another investment owned by the same company.

Tax Incentives

While tax incentives could encourage the expansion of the sector, they may also lead to large revenue losses for governments. It is therefore important to understand when incentives are appropriate, what types may be most beneficial and how companies are likely to respond to any incentives.

Taxing the Digital Economy: Implications for Mining

When a mining investment is financed through debt, interest payments are tax deductible. When there are no controls on the amount of debt (compared to the amount of equity) or on the interest rates charged, there is a risk companies will allocate high debt and interest levels to the host country to pay less tax.

Thin Capitalization

When a mining investment is financed through debt, interest payments are tax deductible. When there are no controls on the amount of debt (compared to the amount of equity) or on the interest rates charged, there is a risk companies will allocate high debt and interest levels to the host country to pay less tax.

Transfer Pricing

Transfer mispricing can occur when goods or services are sold at non-market prices between affiliates in a multinational company in order to allocate profits to a lower tax jurisdiction.

“The training on transfer pricing risk assessment in the mining sector was very useful and practical, reflecting actual issues encountered by auditors.”