Limiting the Impact of Excessive Interest Deductions on Mining Revenue

Raising tax revenue is especially important for developing countries, as strong tax systems are central to financing development. In many countries revenue remains well below the levels needed to achieve the Sustainable Development Goals and secure robust and stable growth. Like other sectors of the economy, there are tax base erosion risks in the mining sector that can hinder domestic resource mobilization, particularly from the operations of multinational enterprises.

This practice note examines the particular base erosion risks from the use of debt by mining multinationals and responds to a concern of many developing countries that multinationals excessively use debt in mineral-producing countries as a mechanism to shift profits abroad and avoid tax obligations.