Transfer Pricing New Publication: Toolkit for Transfer Pricing Risk Assessment for the African Mining Industry

Base erosion and profit shifting (BEPS) to countries with low tax rates by multinational resource enterprises is having a negative impact on domestic resource mobilization in developing countries. The loss of tax revenue that results from BEPS practices puts increasing pressure on public budgets and limits the options available to the countries concerned to finance their own development and the achievement of the SDGs.

Inter-company transfer pricing can be used to manipulate the tax base and to avoid payments. In order to strengthen the capacities of tax authorities in partner countries with an active extractive sector, the Extractives and Developmentsector programme on behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ) has developed the Toolkit for Transfer Pricing Risk Assessment for the African Mining Industry.

The toolkit was launched on September 28 at the International Conference on Tax in Africa, convened by the African Tax Administration Forum (ATAF). 38 African tax authorities converged in Abuja, Nigeria, to discuss the best ways to boost tax revenues and, in particular, how to improve the collection of corporate income tax.

The Transfer Pricing Risk Assessment Tool is intended to be used primarily by tax authorities in resource-rich developing countries. It addresses the transfer mispricing challenge by offering user-friendly, step-by-step guidance on how to determine whether transactions in the extractive sector should be subject to transfer pricing audits. Moreover, it assists tax authorities to develop sector-specific expertise with a view to identifying and counteracting transfer pricing risks in the extractive sector. It also sets out the exact information required by the tax authorities for investigating and assessing transfer pricing issues.

In addition to the toolkit, which can be accessed on ATAF’s website in English and French here (External link), Extractives and Development and the Intergovernmental Forum on Mining (IGF) are currently working on a corresponding training for the African tax authorities.

For more information, please reach out to a member of the GIZ-team (External link).