As part of the ongoing work of the OECD/IGF partnership on the BEPS in Mining Programme, the OECD and IGF are seeking public comments on a toolkit that is designed to support developing countries in addressing the tax policy and tax administration considerations related to the ring-fencing of mining income.
Ring-Fencing Mining Income: A toolkit for tax administrators and policymakers
- Submission period
- 13 Dec 2024 - 31 Jan 2025
About
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.
How to contribute
One document is released for public consultation:
- Ring-Fencing Mining Income: A toolkit for tax administrators and policymakers (French and Spanish versions will be released soon)
Officials of resource-rich governments could consider managing revenue risks by limiting consolidation by operators in the mining sector through a practice known as ring-fencing. Ring-fencing limits the ability of the mining investor to offset expenditures and revenues between projects and activities, which accelerates government revenues from mining and protects the mining tax base against permanent revenue losses. In addition, it may level the playing field between new and existing investors.
This practice note aims to clarify what ring-fencing means in mining, the advantages of adopting ring-fencing rules where certain conditions are in place, and how to mitigate potential challenges through good tax policy design and effective tax administration practices. It describes and evaluates the different options for designing ring-fencing rules based on the experience of resource-rich countries and highlights key implementation issues that have emerged from the options. This note will help governments of resource-rich developing countries decide if ring-fencing rules are necessary and, if they are, how to design them to safeguard the timing of government revenues from mining.
Interested parties are invited to send their comments no later than 31 January 2025 by e-mail to CTP.BEPS@oecd.org in Word format (in order to facilitate their distribution to government officials). All comments should be addressed to the Global Relations and Development Division, OECD Centre for Tax Policy and Administration.
Please note that all comments received will be made publicly available. Comments submitted in the name of a collective "grouping" or "coalition", or by any person submitting comments on behalf of another person or group of persons, should identify all enterprises or individuals who are members of that collective group, or the person(s) on whose behalf the commentator(s) are acting.
Further information
Further information on the work of both organisations is available at:
