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Response to the OECD’s Provision on Activities in Connection with the Exploration and Exploitation of Extractible Natural Resources

20 December 2023

The mining industry has a crucial role to play in providing the materials needed to enable the energy transition required for the world to meet its carbon reduction targets. To meet this need, new sources for these critical metals and minerals will be required. 

While it is essential that the activities generating any profits arising are taxed in line with the agreements made with sovereign states, we believe that it is important that governments ensure that barriers to trade are limited. This is to encourage investment in the new mines the world needs.

On 16 November 2023, the Organisation for Economic Co-operation and Development (OECD) opened public consultation on its discussion draft on the Provision on Activities in Connection with the Exploration and Exploitation of Extractible Natural Resources.

In our response, we highlight that the future of resource taxation, including clear tax rules with appropriate and administrable ways to allocate taxing rights to reduce and eliminate double taxation, is extremely important for a responsible mining industry.

We believe that:

  • The OECD’s proposed “30 day” rule is very short and could be problematic in practice for very early-stage investments opportunities especially if they exist in a country in which the mining company has no prior experience or presence. The 30 day rule also does not align with typical employment tax reporting deadlines. We would favour a longer period and/or a preparatory and auxiliary exemption to protect against a preponderance of Permanent Establishments that do not generate significant (or any) profits.
  • The breadth of the activities in scope (particularly for offshore only activities) is wide enough to capture significant incidental activity as currently drafted. Further clarity could be provided in the text and supported by examples in commentary to provide certainty to taxpayers and tax administrations.
  • The inclusion of the “designed or modified” language in relation to shipping vessels could lead to administrative challenges and disputes and it is not clear why this wording is aligned to the broader policy objective.