GLOBAL DIGITAL TAX REFORMS AND MINING: THE ISSUE OF TIMING DIFFERENCES

This report by the International Institute for Sustainable Development (IISD) and the African Tax Administration Forum (ATAF) examines how the OECD's Pillar Two global minimum tax proposal may negatively impact the mining sector in resource-rich developing countries due to 'timing differences' between accounting and tax profits.

• Pillar Two's Global Anti-Base Erosion (GloBE) proposal aims to reduce tax avoidance by ensuring multinational enterprises pay a minimum Effective Tax Rate (ETR) globally, which could disincentivize harmful tax competition and income tax holidays.
• Timing differences occur when there are discrepancies between accounting profits used for the GloBE ETR and taxable profits determined by local tax rules. In mining, this is most prominent where capital expenditures are depreciated faster under local tax rules than under accounting norms, potentially making a project's ETR appear below the minimum rate during early cost-recovery periods.
• If timing differences are not resolved, resource-rich developing countries may face reduced mining investment and a transfer of tax revenue to developed countries. This is because the 'Income Inclusion Rule' (IIR) allows the parent company's home country to collect a top-up tax if the subsidiary's ETR is below the minimum rate.
• The report evaluates three proposals to resolve timing differences: 1) Loss carryforwards and income inclusion credits, which are deemed inadequate for capital-intensive mining; 2) Deferred-tax accounting, which is standard industry practice and transparent but relies on some estimates; and 3) Using local tax rules for the GloBE ETR, which reduces judgment but increases compliance complexity.
• Permanent differences, such as tax holidays, also pose a risk. Developing countries may be unable to quickly remove these incentives due to fiscal stabilization clauses in long-term mining contracts, potentially leading to a double loss of revenue (forgoing the incentive and losing the top-up tax to the parent company's jurisdiction).

APA

Readhead, A., Lassourd, T., & Corrick, L. (2021). GLOBAL DIGITAL TAX REFORMS AND MINING: THE ISSUE OF TIMING DIFFERENCES. International Institute for Sustainable Development. https://www.iisd.org/system/files/2021-04/global-digital-tax-reforms-mining-en.pdf

Chicago

Readhead, Alexandra, Thomas Lassourd, and Lee Corrick. GLOBAL DIGITAL TAX REFORMS AND MINING: THE ISSUE OF TIMING DIFFERENCES. International Institute for Sustainable Development, 2021. https://www.iisd.org/system/files/2021-04/global-digital-tax-reforms-mining-en.pdf.

Wikipedia

{{cite report |last1=Readhead |first1=Alexandra |last2=Lassourd |first2=Thomas |last3=Corrick |first3=Lee |title=GLOBAL DIGITAL TAX REFORMS AND MINING: THE ISSUE OF TIMING DIFFERENCES |publisher=International Institute for Sustainable Development |date=April 2021 |url=https://www.iisd.org/system/files/2021-04/global-digital-tax-reforms-mining-en.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{readhead2021global, author = {Readhead, Alexandra and Lassourd, Thomas and Corrick, Lee}, title = {{GLOBAL DIGITAL TAX REFORMS AND MINING: THE ISSUE OF TIMING DIFFERENCES}}, institution = {International Institute for Sustainable Development}, year = {2021}, month = apr, url = {https://www.iisd.org/system/files/2021-04/global-digital-tax-reforms-mining-en.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }