Interim Information Report on Transfer Pricing in Mining An African Perspective

By Pietro Guj (Corresponding author), Bryan Maybee, Frederick Cawood, Joel Cooper, Nishana Gosai and Steef Huibregtse.

Possible ongoing abuse of transfer pricing (TP) mechanisms in the extractive industries has emerged as a major threat to fiscal revenue. Recent reviews conducted by the World Bank (WB) of the mining taxation policy and administrative procedures of a number of mineral-rich African countries have identified a strong need for a study focusing specifically on revenue and cost characterisation of current African mining operations at various stages of the mining supply chain and mapping of their key TP risk points to revenue. The objective of this study, to be published in the form of a source book early in 2015 jointly by the WB, the International Mining for Development Centre (IM4DC) and Centre for Exploration Targeting (CET), is to formulate a practical framework of effective strategies to prioritise the TP audit efforts and concentrate resources and training toward financially significant high-risk transactions, while devising simplified methodologies to address routine low-risk transactions. The overarching objective is to achieve practical relevance to the needs of tax practitioners in mineral-rich developing countries by assisting them in their progressive development and implementation of good TP policy, rules, systems and procedures aligned to the fundamental arm’s-length principle.

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