Transfer Pricing in mining with a focus on Africa by Steef Huibregtse (TP Associates) and others
PART OF THE PRECIS:
The World Bank Group, led by the Energy and Extractives Global Practice, has been at the forefront of offering advice on good practices, as well as on undertaking diagnostic visits and building capacity of developing countries on mineral tax administrationTax authorities are fundamental institutions within government frameworks, overseeing tax assessment, collection, and administration. Their operations ensure that tax laws are enforced and public funds are collected efficiently. This article delves into tax authorities' purpose, responsibilities, and structure, offering insights into their essential role in supporting government functions and economic stability. What is a Tax Authority? A tax authority is.... It has adopted a phased approach—wherein it undertakes research and disseminates findings through publication of the results which informs the development of training modules delivered through workshops. The first phase of work led to the publication of the sourcebook titled “How to Improve Mining Tax AdministrationTax authorities are fundamental institutions within government frameworks, overseeing tax assessment, collection, and administration. Their operations ensure that tax laws are enforced and public funds are collected efficiently. This article delves into tax authorities' purpose, responsibilities, and structure, offering insights into their essential role in supporting government functions and economic stability. What is a Tax Authority? A tax authority is... and Collection Frameworks.”1 The document provides policy makers and other stakeholders with a framework to assess and process various types of royalties systems; principles of their administration including valuation points, costs deductibility, assessments and auditing; elements of mining specific components of corporate income taxCorporate Tax refers to the tax imposed by governments on the income or capital of corporations. Corporations, considered separate legal entities, are taxed on their profits, meaning the income generated from their operational activities, investments, and other financial undertakings. This tax is generally a key revenue source for governments, helping to fund public services, infrastructure, and other essential functions. The...; implications of some incentives and their possible impacts on tax payments; procedures for administering various types of payments to Governments, human resources, institutional collaboration, coordination, and capacity building; and information sharing required to drive compliance of mining taxation payments. The work has been more focused on revenues accruing starting from the development stage and on informing strategies to drive compliance of payments while acknowledging governance is also a significant influencing factor.
The need for a complementary study focusing on transfer pricingTransfer pricing is a fundamental concept in international taxation that defines the pricing methods and rules applied to transactions between related entities within a multinational enterprise (MNE). In the context of tax regulations, it governs how prices for goods, services, or intangibles (such as intellectual property) are set when these items are exchanged between different branches, subsidiaries, or affiliates of... (TP), specifically in the context of mining in developing countries, was clearly identified by a number of reviews and workshops conducted by the World Bank Group (WBG) during phase one. This was later corroborated by a TP questionnaire administered to a large number of tax administrations in Africa,2 which indicated that while most administrations have in place or are in the processes of developing an adequate legislative basis to address TP issues, with a few exceptions, enforcement of TP rules to date has been modest or lacking all together. This state of affairs is attributable inter alia to the limited capacity of most tax administrations to deal with the complexity of TP issues in mining because of both a lack of specific TP expertise and of intimate knowledge of this industry sector, which is largely attributable to the current inadequacy of the resources that most African governments can direct to address this situation and access to relevant information from the taxpayers. This study has been conducted with cognizance of the G20/OECD’s BEPSBEPS stands for "Base Erosion and Profit Shifting". BEPS refers to tax avoidance strategies used by multinational enterprises (MNEs) to exploit gaps and mismatches in the international tax system. By shifting profits from high-tax jurisdictions to low- or no-tax locations, MNEs reduce their overall tax burden, even if little to no economic activity occurs in the low-tax jurisdictions. These practices erode... Action Plan, the views expressed in the related discussion papers and industry’s comments, and its final recommendations released at the end of 2015.
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