Commodity Trading: Understanding the tax-related challenges for home and host countries
Numerous non-governmental organizations, academic institutions, international organisations, and other government agencies, have begun studies and initiatives to combat Illicit Financial Flows (IFFs), specifically corruption, and improve transparency of commodity trading.
However, one aspect of commodity trading that is less well understood is mineral sales between private mining companies (as distinct as from state owned mining companies) and commodity traders, and any potential tax, or financial risks these pose for host country governments. These risks may differ depending on the type of commodity trader.
IISD will study how commodity traders (i.e. independent traders, integrated miners, and refineries) are involved in buying, and selling mineral production from private mining companies in resource-rich developing countries. Based on the research, IISD will identify any tax, and financial risks associated with the transactions that have the potential to undermine government revenue collection in the host country. This will help identify what measures home countries can also contribute to ensuring developing host countries can achieve their revenue collection objectives.
The study is intended to take in the full range of tax risks posed by mineral trading, and thus, is not limited to specific mineral products. It will focus on traders originating from, or based in, the major commodity trading hubs, for example, Switzerland, Singapore, London and Dubai (“home countries”).
The study is intended to be completed by the end of 2018. This is a related project to work on Base Erosion and Profit Shifting (BEPS) in Mining being conducted by the Intergovernmental Forum on Mining, Minerals, Metals and Sustainable Development (IGF) in association with the OECD.