Trends in taxation: coping with transparency, mining royalties and volatility

Trends in taxation: coping with transparency, min...

The dramatic fall in global mining commodity prices, along with high national deficits and a slow climb out of recession in most economies, has elicited a strong reaction from governments.  

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The shift towards indirect taxes and fees reflect governments' efforts to guarantee revenues, striking a balance between a sustainable return on natural resources and a reasonable profit to the mining companies.

On top of this, the burden of proving that companies are paying the right amount of tax no longer rests solely with the taxing authorities. In more and more countries, mining firms may soon be forced to fully disclose all revenues and taxes generated globally, on a country-by-country basis. Such disclosure will put the spotlight on companies' attempts to negotiate or structure into tax efficient operating models.

In this latest paper from KPMG's Global Mining Institute, we take a deeper look at the global movement towards tax transparency, and the steps companies should consider in order to comply with pending disclosure requirements. As this new operating environment exposes tax postures to tax authorities and, in many cases, to the general public, we discuss how mining firms can manage these challenges.

The paper also traces the global trend towards resource nationalization and the resulting volatility in tax policies applied to the extractive industries. Our analysis of recent events in several countries covers issues such as Mexico's new 2014 mining fees, and the repeal of Australia's Minerals Resource Rent Tax after a heated debate on its effectiveness and market impact. Other markets covered in some depth include South Africa and Papua New Guinea.

They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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