Tax Base Erosion and Profit Shifting (BEPS)
Tax base erosion and profit shifting (BEPS) through aggressive tax avoidance costs developing countries USD 200 billion in revenue annually, across all sectors. Resource-rich countries face unique BEPS risks and administration challenges that can prevent effective taxation of the mining sector and divert revenue from host governments. With a long list of Sustainable Development Goals (SDGs) to fund and the COVID-19 pandemic stressing public resources, it is more important than ever for resource-rich developing country governments to ensure existing and future mining projects fully contribute to public finances.
Why Is IGF Working on BEPS?
In 2016, IGF member governments identified addressing BEPS challenges as critical to facilitating financial benefit optimization—one of the six pillars of the IGF’s cornerstone Mining Policy Framework.
The IGF partnered with the Organisation for Economic Co-operation and Development’s (OECD) Centre for Tax Policy and Administration to deliver the BEPS in Mining Program. Combining their respective mining and tax expertise, the IGF and OECD are building on global efforts to combat corporate tax avoidance by delivering sector-specific resources and capacity-building training to government officials in resource-rich developing countries to promote robust and effective mining tax policy and administration. The program focuses on the complex and longstanding BEPS challenges facing resource-rich developing countries, including:
- Excessive interest deductions
- International tax treaties
- Mineral pricing
- Offshore transfer of mining assets
- Tax incentives
- Taxing the digital economy and implications for mining nations
- Transfer pricing
Any IGF member can request technical assistance from the BEPS in Mining Program. More detailed information is available on the BEPS in Mining Program website.
The mining sector is at a nexus of important global phenomena: the impact of climate change and the push to green the world economy, the development of new technologies affecting labour markets, and global momentum against inequalities and in favour of tax reforms. These trends are raising the importance of mining both for its mineral and financial outputs. In this context, governments will need new and innovative fiscal measures to protect the public’s financial interests during the next generation of resource extraction. As such, the IGF partnered with the African Tax Administration Forum (ATAF) in 2020 to launch an ambitious project: The Future of Resource Taxation.
The Future of Resource Taxation rethinks how developing countries benefit financially from their mineral resources. The project is a dedicated dialogue for governments, civil society, and industry to exchange ideas on how the current system of mining taxation can be improved and identify new, innovative fiscal options for resource-rich countries to maximize the returns from their mineral wealth.
The project will be delivered in three phases:
- Researching fiscal policy to develop a deep understanding of its role in mining-sector investment—as well as how and why minerals are currently taxed—with an eye to unfolding changes in the sector and their effects on how financial benefits flow to governments.
- Crowdsourcing ideas and innovative approaches to fiscal regime design and administration for the mining sector—from incremental reforms to more fundamental changes.
- Assessing the proposals, specifically looking at feasibility, impacts for investment, project development, and government revenues. Proposals that are innovative, forward-looking, responsive to global trends, and suitable for developing countries will be selected for further research.
The final output will be a handbook containing a menu of ideas to improve mining revenue collection and a framework to help policy-makers think through these options. The handbook will be released for public consultation before being presented for endorsement by ATAF and IGF members.
To learn more about this project, read the Future of Resource Taxation Roadmap:
Alexandra Readhead is IGF’s Lead, Tax and Extractives. Her work involves designing mining sector-specific solutions to some of the most difficult taxation challenges for resource-rich developing countries.
Thomas Lassourd is a Senior Policy Advisor with the IGF, working on the BEPS in Mining Program. His areas of specialization include public finance and fiscal reform with a strong focus on tax policy in extractive industries.
Jaqueline Taquiri is a Policy Advisor supporting the IGF’s BEPS in Mining Program. She is an expert in international taxation law and the extractive industries, as well as global transparency and accountability initiatives related to the extractive industries.
Viola Tarus is a Consultant with the IGF, focusing on The Future of Resource Taxation project. She is a trained economist specializing in extractives.
- Organisation for Economic Co-operation and Development
- African Tax Administration Forum
- Inter-American Center of Tax Administrations
- International Senior Lawyers Project
- The IGF Secretariat is funded by the Government of Canada.
- The BEPS in Mining Program is funded by the Government of the United Kingdom.
- The Future of Resource Taxation project is funded by the Ford Foundation and Swiss Agency for Development and Cooperation.