{"id":3237,"date":"2019-11-20T20:28:05","date_gmt":"2019-11-20T20:28:05","guid":{"rendered":"https:\/\/www.igfmining.org\/stage_new\/resource-rich-countries-and-the-digital-tax-agenda\/"},"modified":"2023-06-21T17:53:26","modified_gmt":"2023-06-21T17:53:26","slug":"resource-rich-countries-and-the-digital-tax-agenda","status":"publish","type":"post","link":"https:\/\/www.igfmining.org\/stage\/resource-rich-countries-and-the-digital-tax-agenda\/","title":{"rendered":"Resource-Rich Countries and the Digital Tax Agenda"},"content":{"rendered":"

Those of us involved in the mining sector could be forgiven for thinking that the OECD\u2019s program of work on digital tax reform<\/a> does not apply to us. Companies such as Facebook and Amazon seem to be the obvious targets\u2014i.e., highly digitalized businesses that operate remotely from the countries where their sales arise and thus avoid having a taxable presence.<\/p>\n

Mining, on the other hand, remains a “bricks and mortar” business (although take-up of digital technologies<\/a> is increasing). The physical presence of a mine, not to mention public ownership of the resource, creates an irrefutable obligation to pay tax in the resource-owning country.<\/p>\n

However, the OECD program to tax the digital economy, which has become somewhat of a misnomer, will apply to all businesses that are within its parameters, making it critical to fashion this intended scope clearly or to include a carve-out for certain sectors.<\/p>\n

Under the so-called \u201cUnified Approach,<\/a>” a new taxing right will be established in the market or destination country (i.e., where the goods end up). This first part is called \u201cAmount A,\u201d and it means that a company that is not physically present in the country where its consumers are located will have a tax \u201cnexus\u201d based on its sales. In the case of mining, this would mean some of the profits from the sale of minerals would be transferred from the resource-owning country, and residence country, to the customer\u2019s location.<\/p>\n

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Taking Anglo American as an example, if sales were added as a basis for allocating profit (see orange bar below), the share of global profit would fall in the resource-owning countries (e.g., South Africa, Brazil, Chile) and increase in the market countries (e.g., Asia [primarily China] and Europe).<\/p>\n

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Source: Calculations are based on Anglo\u2019s 2017 Financial Statement. Data used is illustrative.<\/span><\/p><\/div>\n

It is up to the 135 countries that make up the Inclusive Framework to decide whether mining is within the scope of the new taxing right. The OECD Secretariat\u2019s position so far is that it should not be included. IGF firmly supports the Secretariat’s view for the following reasons:<\/p>\n