The Organisation for Economic Co-operation and Development (OECD) has released an announcement inviting public feedback on a draft toolkit published on 13 December 2024.

This toolkit aims to assist developing countries address tax policy and administrative challenges associated with ring-fencing income from mining activities. This is part of the ongoing work by the OECD and the Intergovernmental Forum on Mining, Minerals, Metals and Sustainable Development (IGF) on BEPS in the mining sector.

Feedback on the draft must be submitted by 31 January 2025.

Background

For many resource-rich developing countries, mineral resources present a significant economic opportunity to increase government revenue. Tax base erosion and profit shifting (BEPS), combined with gaps in the capabilities of tax authorities in developing countries, threaten this prospect. The OECD’s Centre for Tax Policy and Administration (CTPA) is collaborating with the Intergovernmental Forum on Mining, Minerals, Metals and Sustainable Development (IGF) to address some of the challenges developing countries face in raising revenue from their mining sectors. Under this partnership, a series of practice notes and tools are being developed for governments.

The IGF and OECD CTPA have formed a partnership, combining the IGF’s mining expertise with the OECD’s knowledge of taxation to design sector-specific guidance on some of the most pressing BEPS challenges facing resource-rich developing countries.

The design of fiscal regimes for the mining sector gives rise to various challenging considerations, especially when the tax system seeks to tax the economic rents resulting from mining activities with higher tax rates than other commercial activities. Ring-fencing rules are designed to isolate the income from specific mining projects or activities from other economic activities, which may be subject to a different tax burden. Challenging questions arise both in the process of tax policy design as well as at the stage of practical administration and compliance.

This toolkit seeks to identify these challenges and formulates relevant practical recommendations for policymakers and tax administrations.