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Cover of Policy Paper 128
July 16, 2018

What Mining Can Learn from Oil: A Study of Special Transfer Pricing Practices in the Oil Sector, and their Potential Application to Hard Rock Minerals

Governments of mining countries are vulnerable to investors manipulating transfer prices as a means of avoiding paying taxes. This paper looks at whether special practices in the oil sector that provide materially greater protection against transfer pricing risk could be applied to hard rock minerals. These are (1) administrative pricing, where government, rather than the taxpayer sets the price for crude oil; and (2) the no-profit rule, which prevents joint venture partners from charging a profit mark-up on the cost of providing goods and services to the group.