Deloitte Global report examines the future of tax in mining
With more stringent regulation and an increasingly complex tax environment comes a need for miners to communicate a clearer message to their stakeholders
Key trends highlighted include communication challenges, disruptive technologies, a continued focus on transparency, and responding to new policies and regulations
NEW YORK, Moscow, 07 February 2018 — With the global thrust toward more-stringent transparency regulations, mining companies must do more to garner the public’s support in the countries in which they operate. This is according to Deloitte Touche Tohmatsu Limited (Deloitte Global)’s report released today, The future of tax in mining: the evolving global landscape.
“Mining companies have arguably led the way in reporting their tax payments and other economic contributions to countries long before such disclosures were mandatory. But despite transparency efforts and the industry’s significant contribution to the world’s economy, the industry often struggles with a negative public perception,” said James Ferguson, Deloitte Global Mining Tax Leader. “Ultimately, mining companies have to be proactive in convincing the people in the countries in which they operate that they are significantly contributing to the economy. This means finding ways to distil their responses to often complex tax and disclosure rules into simple, understandable statements.”
The report explores how mining companies can navigate a rapidly changing, and increasingly complex tax environment by embracing digital technologies, revamping their structures and processes, and rethinking how they interact with revenue authorities and governments as well as how they communicate with taxpayers.
Gennady Kamyshnikov, Deloitte CIS Energy & Resources Leader added: “All the trends outlined in this report are typical of the CIS natural resources companies as well. In Russia alone, 10 natural resources companies will soon start disclosing their revenue and pretax profit per country to the respective tax authorities in all the jurisdictions where they operate. Therefore, the operations of natural resources companies (most of which report good financial results nowadays) will become the most transparent for supervisory authorities, as well as, to a significant degree, for other interested parties. An interesting conclusion is that tax functions at natural resources companies need to play a more pronounced role in internal and external corporate communications, and this has already been the case in some companies.
Key trends explored include:
· Disruptive technologies and taxes: Whether disruptive technologies are adopted by tax authorities or corporate taxpayers, they can potentially and fundamentally change the way things are done. Disruptive technologies are changing the way data is collected, processed and understood, and this opens up a world of opportunities for tax groups to eliminate tedious manual activities and create more value for the business.
· Moving the economic contribution conversation into the public domain: To stem the flow of red tape and mitigate even tougher government measures, mining companies must find their voice in articulating their contributions to local and national economies in which they operate.
· Searching for transparency amidst the red tape: As the extractives sector contends with an ever-increasing set of mandatory transparency rules and regulations, against a backdrop of voluntary transparency programs, the report questions if the disclosure rules are achieving what they set out to.
· Base erosion and profit shifting: Changes to international tax rules developed by the OECD are now impacting investment structures and how mining companies do business. Evolving strategies to meet these new challenges are key issues mining companies are facing.
All of these trends imply that tax functions within mining companies increasingly need to have a voice as well as a clear message. This concept applies internally when making important decisions regarding disruptive technologies, as well as externally when explaining the crux of complicated disclosures to tax authorities or the public. Senior-level executives within mining companies need to proactively engage and put forth their position and key matters and ensure effective and clear communication of their disclosures.
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