On 18 June 2018 the OECD published a draft toolkit to help developing countries identify and cost the potential behavioural responses by mining investors to tax incentives. Comments on the draft toolkit are invited from interested parties by 6 July 2018,

A cost benefit exercise is generally to be recommended in respect of tax incentives which involve a reduction in tax income in return for a hoped-for change in investor behaviour, Tax incentives need to be carefully targeted and monitored to ensure that they are achieving their intended purpose. This applies especially in the case of developing countries as they need to generate tax revenue to support economic growth and development.

Resource-rich developing countries know that their mineral resources present an important economic opportunity to increase government revenue by imposing relevant taxes and charges on mining companies. International mining companies operating in resource-rich developing companies may seek to avoid tax by means of base erosion and profit shifting (BEPS) and exploiting gaps in the resources and capabilities of the local tax authorities. Multinational mining enterprises may try to avoid taxes by using tax incentives offered by the governments.

Tax incentives offered by developing countries may significantly reduce government revenue, especially when investors attempt to use them in ways that exceed the tax benefit initially intended by government.

A draft toolkit has now been prepared by the OECD and the Intergovernmental Forum on Mining, Minerals, Metals and Sustainable Development (IGF). The toolkit is designed to help governments anticipate and limit the cost of mining tax incentives. The toolkit is a part of more general efforts to examine some of the challenges faced by developing countries when trying to raise tax revenue from the mining sector.

It should also be noted that the Platform for Collaboration on Tax (PCT) has been looking at options for more effective and efficient use of tax incentives by low-income countries. The PCT was set up by the IMF, OECD, UN and World Bank at the request of the G20 group of countries to recommend mechanisms to ensure effective implementation of technical assistance programs.