sharing in governance of extractive industries

Transfer Pricing in Mining with a Focus on Africa - Reference Guide

Transparency of financial flows from extractives, tax base erosion in general and transfer pricing in specific are key areas of concern to developing countries. This at a time when extractives resources rich countries have steadily been increasing including in low to middle-income countries over the past quarter of century.  Some estimate that by 2030 half of the global population global population living on less than two dollars a day will reside in countries with extractive-driven economies. Capturing appropriate revenues from nonrenewable extractive resources is, therefore, of paramount importance for domestic income mobilization for developing countries, and a major potential source of poverty reduction and inclusive growth.


Mining specifically has been expanding at a time when the multinational enterprises involved have been structuring their operations in ways that result in a spread of their functions, assets and risks across multiple related entities located in different jurisdictions. This trend, which is especially prominent in Africa and in countries with similar economic circumstances, results in value-adding activities moving away from the countries hosting the mining operations. As a consequence, the volume of goods and services provided through cross-border transactions between related entities expands, and the price charged for them demands more attention and proper assessment for tax calculation.


Many developing countries are yet to be fully equipped to deal with transfer pricing risks in general, and even less so for those associated with mineral commodities. This need for support motivated the World Bank Group (WBG), in cooperation with the International Mining for Development Centre (IM4DC) of Australia and the Transfer Pricing Division of the South African Revenue Services (SARS), to develop this Guidebook to address how established transfer pricing principles for intragroup transactions could best be implemented in the context of the mining industry.


This publication identifies typical mining functions and activities and their associated assets and

risks, and those amenable to related party transactions and related transfer pricing risks; investigates key commodities mined in Africa profiling their transfer pricing risks; provides sources of information to assist tax auditors to deal with the scarcity of relevant comparables; and discusses audits, capacity building and institutional methodologies and approaches to enhance compliance with payment of mineral taxes. It is a menu of options and possibilities that may be adapted to the individual circumstances of countries as they tackle their specific mining related transfer pricing challenges.


While this Guidebook is comprehensive in suggesting solutions to mining transfer pricing issues,

its main messages have also been captured in a spinoff report2for stakeholders other than tax administration professionals interested in contributing to the discourse on extractive tax collection administration.


This Guidebook has also been the basis for the development of specialized training modules intended for public, private and civil society stakeholders interested in the topic. Two regional workshops are planned this month in Dar Es Salam (Mar 13-17) for a number of English speaking African countries, and Panama (Mar 21-23) for Latin American countries. A third regional workshop in planned in the coming months for French and Portuguese speaking African countries. More training events may follow.



Transfer pricing in mining with a focus on Africa : a reference guide for practitioners (English)


Transfer pricing in mining with a focus on Africa : a briefing note (English) (the 58-page summary)


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Comment by sampebgo souleymane on March 16, 2017 at 22:18



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