SUMMER INTERNSHIP: August to September 2017

Terms of Reference: Limiting the Harmful Effects of Mining Tax Incentives

Background

In 2017, the Intergovernmental Forum on Mining and Sustainable Development (IGF), together with the OECD,
will launch a two-year program to tackle tax base erosion and profit shifting in the mining sector in developing
countries. IGF is a member-driven organization, providing national governments with the opportunity to work
collectively to achieve their sustainable mining goals. In 2015, IGFs 57 member countries identified tax
avoidance as their primary concern. IGF has responded by launching this new program, together with the OECD.

Building on the OECD/G20-led Actions on Base Erosion and Profit Shifting, this two-year program of work will
develop mining specific tax policy guidance, as well as practical tools for developing countries. The program will
bridge the gap between general international tax guidance, and the mining industry, addressing sector specific
issues such as hedging and metals streaming, as well as crosscutting issues including tax incentives and transfer
pricing. The aim is to create a one-stop shop for developing country governments seeking support on
international taxation of mining projects. This approach will offer countries a holistic view of how different
mining tax issues interact, and the appropriate policy trade-offs.

Project and Objective

IGF is seeking an intern to conduct research into mining tax incentives. The audience for the research is IGF
member countries, specifically tax authorities and finance ministries. The research will be presented at the IGF
Annual General Meeting in Geneva in October, as well as at the OECD Natural Resource Policy Dialogue in Paris
in December.

Mining and exploration tax incentives are common in developing countries. While tax incentives could
encourage expansion of the sector, they may also lead to excess transfers of the gains from countries than
intended. It is unrealistic to expect that developing countries will forgo incentives entirely due to the pressures
of attracting investment. However, it is important that countries understand when tax incentives may be
appropriate, how companies are likely to respond to incentives, and the distinction between tax incentives that
permanently reduce taxes and from provisions affecting timing of revenue collection.

There are three objectives:

1. To summarise empirical evidence of the effect of tax incentives on attracting mining investment;

o A summary of empirical evidence on the significance of tax incentives in attracting foreign

direct investment (FDI) to developing countries. It is sufficient to focus on economy-wide
evidence as it is rare to find mining sector-specific data.

Deliverables: A two to five-page summary of empirical evidence of the effect of tax incentives on attracting FDI
to developing countries, including specific references, or findings relevant to mining investment. The main
objective is for the intern to familiarise himself with tax incentives, and mining fiscal regime design.

Deadline: 16th August

 2. To review the use of tax incentives in the mining sector in developing countries.

o A review of tax incentives in mining fiscal regimes,1 and mining contracts.2 Tax incentives may
be legislated or discretionary. For tax incentives included in the mining fiscal regime, the
benchmark is the general tax code (i.e. tax treatment of other sectors). For tax incentives
included in contracts, the benchmark is the mining fiscal regime (i.e. tax treatment of the
mining sector). The purpose of the review is to determine the following:

which types of tax incentives are in use,

how prevalent are they (i.e. which are most common),
how they are formulated (e.g. are tax holidays time-based or production-based);
are they legislated or discretionary;
to what extent incentives diverge from the relevant benchmark.

Some countries may have gone through numerous generations of tax incentives, in which case it may be useful
to explain the changes, and the rationale.

Deliverables: An excel spreadsheet with detailed results of the review; and a written summary of key findings.

Deadline: 16th August

3. To develop a collection of country case studies that demonstrate both efficient and effective use of tax
incentives for mining investment, as well as tax incentives that have significantly undermined the tax
base, particularly those that have had unintended consequences, or been subject to abuse.

o Case studies should be collected from existing literature, as well as from interviews with
government officials, international organisations, and civil society groups;
o Each case study should explain the tax incentive used, how it was formulated, why it was
applied, and the effect on revenue collection;
o Emphasis should be on finding case studies involving tax incentives that resulted in unintended
negative consequences and/or profit shifting.

Deliverables: Eight case studies (no more than one page each) demonstrating a combination of well designed,
and poorly designed tax incentives for mining investment; and a summary of key lessons for future design and
use of tax incentives for mining investment.

Deadline: 1st September (draft for feedback); 8th September (final).

Timeline

The project will be undertaken between 7th of August and 8th of September 2017.

1 Mining Legislation Atlas - https://www.a-mla.org

2 Database for published mining contracts - http://www.resourcecontracts.org
Location

The IGF is based in Canada, however the Technical Advisor for the IGF program is based in Oxford. Consequently,
the internship will take place in London or Oxford (depending on the location of the intern) under the
supervision of the Technical Advisor, Alexandra Readhead. The intern will need to work out of London or Oxford
for the duration of the internship, meeting frequently with the Technical Advisor.

Remuneration

The IGF will pay the intern a total of 1000. It will also cover any costs directly related to the work, provided
these are approved by the Technical Advisor beforehand.

Required Profile:
Strong quantitative and qualitative research experience;
Knowledge of international taxation and investment incentives;
Knowledge of the mining sector (desirable).

Please send a brief cover letter and CV to Alexandra.readhead@iisd.org by the 23rd of July.