Types Fair and Competitive Fiscal Framework
Fair and Competitive Fiscal Framework
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The allocation of the rights to tax business profits of non-resident entities’ operations depends on whether these operations can constitute a “Permanent Establishment” (PE) according to the definition included in each DTA. CCSI’s research and brief looks at this issue in the context of extractives and provides a sample clause that optimizes the PE definition for resource rich countries.
Designing a Legal Regime to Capture Capital Gains Tax on Indirect Transfers of Mineral and Petroleum Rights: A Practical Guide
Building on the momentum created by the Platform for Collaboration on Tax’s draft paper regarding taxing indirect transfers of source country assets, CCSI and the International Senior Lawyers Project (ISLP) wrote a paper providing practical guidance to developing country governments on the taxation of indirect transfers of extractive industries’ assets. Indirect transfers occur when—instead of selling the asset—the shares of the domestic subsidiary, the shares of the foreign company with a branch in the country, or the shares of the holding company are sold.
Alongside growing revenue and contract transparency, increasing fiscal model transparency is needed. Only with financial model transparency can relevant actors better assess whether contracts are balanced in terms of fiscal returns and understand when revenues start flowing to the government. CCSI strongly supports financial model transparency and has developed two open fiscal models. We are currently welcoming feedback on their usefulness, user-friendliness, and on any observed inaccuracies.
CCSI advises governments and civil society organizations on various issues relating to fiscal frameworks for the extractive industries sector.
CCSI strongly supports the transparency of contracts and tax flows and has published research and papers making the business case for transparency, including two submissions to the SEC in 2011 and 2015.
Monitoring fiscal reforms in extractive industries is an ongoing part of CCSI’s research.
CCSI is researching aspects of designing and implementing fiscal regimes in an attempt to identify legal and fiscal elements that can help avoid unintended consequences or disputes between an investor and the government over the course of the investment.
In partnership with the Carter Center, CCSI developed two economic models for the Sicomines mine in the DRC. The models compared the financial flows under the resource for infrastructure deal with a ‘traditional’ contract under the mining code of the DRC. The collaboration agreement between the Congolese Government and a consortium of Chinese companies is one of the most prominent resource for infrastructure deals, with Chinese investors providing a concessional loan of US$3 billion for infrastructure investments that are unrelated to the mining project and US$3 billion for the copper-cobalt mine itself. The loan is to be repaid through the profits of the mining project, which started operations in 2015.