The OECD’s Centre for Tax Policy and the Intergovernmental Forum on Mining, Minerals, Metals and Sustainable Development (IGF) today jointly released a draft practice note addressing how governments can protect themselves from tax avoidance by multinational mining companies that take excessive interest deductions.
The draft note responds to concerns expressed by developing country tax officials that multinationals use debt excessively in mineral producing countries as a mechanism to shift profits to low tax countries.
The note discusses how debt finance is typically used by mining companies; identifies abusive base erosion behaviors and structures; and discusses possible measures to combat this abuse, including potential use of the interest deduction limits developed by OECD and G20 countries in the 2015 base erosion profit shifting (BEPS) plan agreements
Comments are requested on the draft by May 18.
The practice note is part of a program of cooperation between the OECD and IGF to address tax and other revenue loss in countries that host mining companies. It is noted, though, that neither the OECD nor the IGF nor their member countries officially endorse the views expressed in the practice note.
Other topics to be addressed by this partnership will include abusive transfer pricing, undervaluation of mineral exports, harmful tax incentives, tax stabilization, tax treaties, metals streaming, abusive hedging, and inadequate ring-fencing, today’s report states.
The IGF is a voluntary partnership comprised of 60 countries with membership open to any member state of the United Nations. Funding is provided by the Canadain government.
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