Taxing the Digital Economy: Implications for Mining

The Challenge

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.

Our Response

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.

English Briefing Note French Briefing Note Spanish Briefing Note

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.

English Report French Report Spanish Report

Tax Incentives and the Proposed Global Minimum Corporate Tax

The OECD/G20 Inclusive Framework member countries moving toward adopting a global minimum corporate tax will be required to implement and administer the rules in a way that is consistent with model legislation and a commentary approved by the Inclusive Framework. In November 2021, the International Institute for Sustainable Development (IISD), the IGF’s host, issued a briefing note with recommendations on how the OECD could design the model legislation and commentary to effectively address the issue of stabilized tax incentives. It builds on IISD’s earlier guidance to developing country governments on how to amend their tax incentives regimes to benefit from the minimum tax and the IGF’s mining-specific resources on the issue.

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.

IGF Guest Blog

Civil Society Perspectives on the Implications of Global Digital Tax Reforms for African Mining Countries

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