Insights

BEPS

...and transfer pricing

The minerals sector globally is watching the Base Erosion and Profit Shifting (BEPS) Action Plan with interest.

Various countries may be revising their transfer-pricing legislation following the wide-spread acknowledgement of base erosion and profit shifting, now referred to as BEPS.

BEPS is a concept that was first discussed by the Group of 20 Countries (G20) and later developed by the Organisation of Economic Cooperation and Development (OECD). G20 countries include Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Republic of Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the United Kingdom, the United States and the European Union, while OECD countries include Australia, Austria, Belgium, Canada, Chile, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Israel, Italy, Japan, Korea, Luxembourg, Mexico, Netherlands, New Zealand, Norway, Poland, Portugal, Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Turkey, United Kingdom and United States.  The OECD is a group of countries that endorse democracy and the market economy and aim to stimulate economic progress and global trade, while the G20, established after the 2007-2010 financial crisis, intends to assist with the international co-ordination of economic policy.

Among the issues that the OECD will address as part of its BEPS Action Plan are measures to combat cross-border tax avoidance, in the case where a company shifts profits between countries to exploit tax-rate differences, and transfer mispricing, where related parties sell goods or services to one another at a cost that would not be used by entities that were independent of each other. 

The minerals sector globally is also watching the BEPS Action Plan with interest. Various parliamentary mineral resources and finance committees, including those in South Africa, are discussing the implications of BEPS. However, while companies in the minerals sector as well as States with a considerable mineral resource endowment are actively investigating possible changes to tax legislation in the light of BEPS, it is understood that a variety of sectors will be affected by BEPS.

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