Lori Whitfield is a transfer
pricing partner with Deloitte
Vancouver, specializing in
transfer pricing planning,
documentation, and tax
controversy.
Jarret Robertson is a transfer
pricing manager with Deloitte
Vancouver, specializing in
intercompany financing
transactions, quantitative
modelling, and tax
controversy.
Matt Isberg is a transfer pricing
analyst with Deloitte
Vancouver, specializing in
economic and econometric
analysis relating to transfer
pricing issues.
Assessing Transfer Pricing Risk in the Mining Industry –
How BEPS Is Changing the Landscape
By Lori Whitfield, CPA, CMA, MA, Jarret Robertson, MTax, and Matt Isberg, MA
M
ining companies have global operations and face unique tax challenges from a transfer pricing perspective.
With the introduction of the OECD/G20’s Base Erosion and Profit Shifting (BEPS) Project in 2013, these
challenges are likely to intensify. As the BEPS guidance is implemented globally, mining companies will face
greater scrutiny with respect to their intercompany transactions and a greater risk of disputes with tax authorities.
The BEPS Project is based on the OECD1 Action Plan endorsed by the G20 in July 2013, which identified key actions
needed to address BEPS. The final BEPS package, which includes 15 “BEPS Actions,” was presented to and endorsed by
the G20 finance ministers and G20 leaders in October and November of 2015, respectively.
In Canada, the recent federal budget made it clear that our government is taking concrete steps towards adopting the
guidance put forth by the BEPS Project, which will ultimately reshape this country’s tax landscape.
This article focuses on the transfer pricing issues currently faced by mining companies, and assesses the risks arising
in this industry due to the BEPS Project.
Current court cases
The international taxation of mining companies has moved into the spotlight in recent years as several material disputes
have surfaced in the industry.
At the time of this writing, the Canadian uranium miner Cameco is under audit by the Canada Revenue Agency
(CRA) for marketing and sales activities carried out by its Swiss subsidiary. The CRA contends that the Swiss subsidiary
was set up for the purpose of avoiding taxes in Canada. The amount of tax at stake could be as high as C$1.6 billion, and
the dispute has been well publicized.2
Similarly, Australian mining companies BHP and Rio Tinto are under audit by the Australian Taxation Office for allegedly
shifting profits through their marketing hubs in Singapore. Both companies have recorded several billion dollars of
profit in these marketing hubs, on which they have paid minimal tax.
In 2013, Vale, a Rio de Janeiro-based mining company, agreed to pay US$9.6 billion to the Brazilian government after
settling a decade-long dispute over corporate taxes on income attributed to its non-Brazilian subsidiaries.3
These examples highlight the financial and reputational risks mining companies face with regard to their transfer pricing
policies. Globally, tax authorities have already started to rely on BEPS guidance, but many companies have not taken
adequate steps to address the current transfer pricing environment.
Organisation for Economic Co-operation and Development (oecd.org).
1
Peter Menyasz, Bloomberg BNA (2015), “Canadian Appellate Court Directs CRA to Provide Arm’s-Length Price in
2
Cameco,” 24 Transfer Pricing Report 255, page 1.
Juan Pablo Spinetto, “Vale to Pay $9.6 Billion to Settle Decade-Long Tax Fight,” Bloomberg, November 28, 2013.
3
buhanovskiy/iStock/Thinkstock
(bloomberg.com)
36 CPABC in Focus • July/August 2016