Tracking tax trends within the current commodity cycle

Tax is in the headlines in a manner few could have predicted – even a year or two ago. This has led to a range of issues for businesses to consider, including the OECD’s Base Erosion and Profit Shifting project.

In the current commodity cycle, Mining companies experience increased scrutiny by management on costs, capital expenditure programs, exploration related prospects and current mining operations to ensure that shareholder value is retained and optimized. The governments in traditional mining countries are facing the crunch as mining companies are declaring less profits increasing pressure on the revenue collecting system. The consequence is sudden tax policy changes or announcements of pending changes.

  1. Mining companies will face challenges as authorities scrutinize community and stakeholder participation structure, along with increased compliance obligations around business travelers and their employers.
  2. As governments look to employ significant incentives to attract foreign investments, mining companies need to be mindful of the mining tax regime supplementing the main tax regime that the authorities employ to extract participation.
  3. Mining companies with investments in resource rich jurisdiction will face additional challenges as OECD releases papers on several BEPS Actions, including themes like Treaty shopping, Transfer pricing documentation and Interest deductibility.
  4. Innovation is increasingly gaining popularity in the mining industry. Mining companies need to consider implications of the tax incentives and R&D grants provided by these resource rich jurisdictions.

Read our publication to know more about the tax trends to be considered by mining companies before formulating their tax policies as a part of their governance plans to tackle these Tax policy changes. 

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