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Taxing the Digital Economy: Implications for Mining
To ensure that companies pay tax in jurisdictions where they conduct digital business but may have no physical presence, a group of more than 135 countries led by the Organisation for Economic Co-operation and Development (OECD) is reforming global taxation rules. The OECD has proposed a two-pillar approach that will affect all sectors of the global economy, beyond digitalized businesses. The first pillar proposes to shift some taxing rights into market or destination countries. Early drafts of the proposal were not suited to extractive industries and have since been amended to exclude minerals and hydrocarbons.
The second pillar of the OECD’s proposal, called the Global Anti-Base Erosion Proposal (GloBE), seeks to use a global minimum tax to discourage multinational companies from transferring profit away from countries of operation. This could support effective taxation in resource-rich developing nations. As it is currently drafted, these countries stand to lose tax revenue and mining investment to more developed countries.
The IGF has prepared a briefing note outlining the OECD’s global digital tax reform proposal and key concerns for mining nations, Global Digital Tax Reforms: Highlighting Potential Impacts for Mining Countries is available in English, French, and Spanish.
To dig deeper into the topic, the IGF partnered with the African Tax Administration Forum (ATAF) to examine a critical issue, arising under the OECD-led proposal, that could cost resource-rich developing countries mining investment and revenue from the sector. In April 2021, IGF and ATAF published Global Digital Tax Reforms and Mining: The Issue of Timing Differences.
IGF-ATAF Presentation: Global Digital Tax Reforms and Mining: The issue of timing differences
Forthcoming work will continue to study specific mining issues related to proposed global digital tax reforms, including the issue permanent differences, between international accounting standards and domestic tax rules, that may also hinder developing countries’ ability to attract investment and collect revenue from the mining sector.
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