Commodity Trading: Understanding the tax-related challenges for home and host countries

Commodity traders play an essential role in metals and minerals trade, with the current number of companies engaged in these activities numbering at least 2000. In the case of some metals, at least one-fifth of global trade in those metals is handled by such companies, with that share even higher in certain instances.

Metals and minerals trading companies, often small in size, pose some tax risk to host country governments. That risk, while limited, still requires further action by traders, tax authorities, lawmakers, and other actors in home and host countries to ensure that they are addressed appropriately, including the potential for corrupt behavior and harmful tax practices. 

This report brings together the results of a literature review and extensive interviews with people from two dozen countries that are engaged in commodity trading. The authors assess the tax risks that these companies may pose to home and host countries, and describe a series of recommendations for mitigating such risks and resolving transparency concerns. The report also provides an overview of the key features and developments in commodity trading, including the moves being made by some of these companies into other areas, such as the provision of financial services. The authors do not cover commodity trading in the oil and gas sectors, nor in agricultural commodities.

The report was prepared by Anton Löf and Magnus Ericsson of RMG Consulting, with the guidance of Alexandra Readhead and Howard Mann of IISD. It was made possible through the support of the Swiss Agency for Development and Cooperation (SDC).