1st meeting, 33rd Session of the Committee of Experts on International Cooperation in Tax Matters

Thank you very much. Good morning, colleagues, and welcome to Geneva. The first open meeting of the 33rd session is declared open. I want, on behalf of my co-chair, Trudy, to welcome every one of us to the 33rd session of the UN Task Committee. Since the last time we met in New York, a lot of progress had been made by the various work teams. And this session presents the opportunity for the reports of progress of the various work streams to be presented. And for you, participants, not only to have information as to what has been done, but to present you a platform to contribute to the work of the committee. We have a very long agenda up to Friday, and we will be delighted if we could have you work with us all through the various open meetings. My co-chair is not immediately with us. She's going to join us in the course of the session. I want to familiarize us with the process. I know we already know. that at open sessions like this, anyone who wants to have the floor, all you need to do is to press the microphone in front of your desk and a green light will come up and that will inform the chair that you intend to speak. And when you are given the floor, you don't need to do anything. the green light will turn to red by itself. That is the wonders of technology. Secondly, priority is given to members of the committee to speak, and then other participants, member states, and other stakeholders will come in that order. We also implore that when we speak, we speak as slowly as possible to enable our interpreters to be able to cope with their work, so that others who probably do not speak the language we are speaking may be well informed of what we are saying. I will pass the microphone to the secretariat who will give us some housekeeping. And I know there will be a remark also from the director in the Sustainable Development Office of the UN as we continue with this 33rd session. Caroline, please take it away.

Thank you so much, Chair, and welcome, members and participants. A few additional housekeeping notes. As the co-chair has reminded, as the members are acting in their personal capacity, we ask, please, that their views should not be reported as though made on behalf of the government that nominated them or attributed as such. I'm also happy to note that the session is being live streamed on UN Web TV. So it's not only available live, but will also be available on archived video on UN website. Our meetings will be interpreted into the six official UN languages. So you have at your desk the earpiece, and you may choose in which language to follow the meetings. Interpretation is also available through the UN Web TV. I would just add that this is a PaperSmart meeting, so all the conference room papers are available online on the main page and also through the timed agenda. And as Co-Chair mentioned, you will take the floor by indicating with the light on your microphone. Perhaps to assist us here at the podium in recognizing also who you are wishing to take the floor, you may also put your name card sideways like this. This will help us very much to spot you and to give you the floor in due time. That is all from us for now, co-chair. So without further ado, we could proceed with the video. Yes. Okay, thank you. So we'll have now, as co-chair mentioned, video remarks from our director, Ms. Sherry Spiegel, of the Financing for Sustainable Development Office.

Distinguished members of the United Nations Tax Committee, observers, ladies and gentlemen, I am very sorry I can't be with you in person, but I'm honored to open the 33rd session of the United Nations Tax Committee on behalf of the UN Secretary General. This 3rd meeting of the 2025 to 2029 membership is crucial in forging the path of the committee. In March in New York, you approve the work plans of all 11 subcommittees. This week, the 1st results come before you. You will consider your 1st substantive outputs. And the provisions of the United Nations model, dealing with services, permanent establishments and income from emerging technologies. and on the attribution of profits to permanent establishments. Put simply, when does the service provision of a foreign business become taxable in a country, and how is profit attributed to a country? International tax rules must answer these questions for ever-changing business models while providing certainty for both tax administrations and taxpayers. You will continue discussions on the 11 work streams covering issues that countries, especially developing ones, are grappling with, paying attention to their interlinkages to produce coherent, highly practical guidance. This breadth reflects a simple reality. Effective taxation requires not only effective rules, but also the institutional capacity, information, and practical tools to implement them. The committee's work is pivotal and putting into practice the ambitious agenda member states agreed in the severe commitment. To bridge the financing gap and fund the investments and in this case, particularly public investments needed to achieve the sustainable development goals. The need is clear. The 2026 Financing for Sustainable Development Report found that 77 countries still collect less than 15% of GDP in taxes, the benchmark referenced in the Sambaia commitment. The committee's work can help bridge this gap. It does so by producing practical advice based on three priorities. First, putting the concerns and priorities of developing countries at the center of its work. Second, shedding light on new and emerging tax issues and challenges. And third, giving countries guidance and options to tackle tax issues and raise more domestic resources. Your work can also inform the ongoing intergovernmental negotiations towards the United Nations Framework Convention on International Tax Cooperation. And in addition to the negotiation sessions, There are three opportunities at the United Nations to share your work with member states in 2027. First, the Equifax special meeting on financial integrity in January. This is one of the new meetings that was mandated in the Seville commitment, and it's on combating illicit financial flows, including tax related illicit financial flows and strengthening transparency. Second, the Equifax special meeting on international cooperation in tax matters. which is in April, a global tax policy dialogue on sustainable development financing, which will be held back-to-back with your 34th session in New York. And third, the Equesac Forum on Financing for Development follow-up, also in April in New York, where all member states review the financing for development outcomes and the means of implementation of the SDGs. And this year, domestic public resources is going to be a priority theme to be discussed in depth. These convenings are opportunities to bring your technical expertise into broader policy discussions and to show how stronger tax cooperation contributes to financial integrity, domestic resource mobilization, and ultimately implementation of the sustainable development goals. I ask you to keep these events in mind this week to consider how your demand-driven work program can inform them. where further international cooperation is needed, and how to turn technical work into practical options and outcomes for Member States. Equally, consider how these priorities and messages emerging from these processes and discussions can help guide the Committee's future work. Excellencies, we are inspired by your shared sense of purpose and your willingness to take on difficult issues. Your openness, technical vigor, and constructive dialogue are essential to guidance that reflects realities on the ground, and even more fundamentally to a common understanding of the difficult issues in front of us and how to overcome them. So I wish you a most successful session and fruitful discussions, and look forward to seeing you in New York. Thank you.

Thank you very much, Sherry, for that very encouraging word. We know that we miss your physical presence, but we know you are with us in spirit. So thank you very much. I don't know if there's a further remark from Secretary. None. Okay, good. So let's quickly look at our agenda for this 33rd session. you have the document EC.18/2026/3. That's where we have the draft agenda. Do we have any comments as regards to the agenda? Okay, thank you. I do not see any flag and so we take the agenda as having been adopted and it is so adopted. Now, before we proceed, I still want on behalf of my co-chair to acknowledge the presence of various member states, observers, and particularly those who have followed us online. We were told by the Secretary that the webcam is already open, only that there is no online participation, but members and other participants can follow the business of this session. Now we will move to agenda 3F. as we invite the coordinator of the taxation of extractive industries. We'll be looking at CRP 17 to come and provide us and lead us in the discussion on that CRP. That should be Darlington. And his team. Okay.

Good morning, colleagues. Thank you, co-chair, for this time. Before beginning, we want to say thank you to all of our subcommittee members. Since our last meeting in New York, we have been working to produce CRP 17. And on behalf of ourself and Olivier, I want to say thank you to them that sometimes we actually disrupted their schedules, their work schedules, their flight schedules. But both drafters, reviewers have been very instrumental in producing the draft CRP that we have to present today in this opening forum, we want to say thank you and our gratitude to them. We'll now go into our presentation for today. So today's presentation will take us through what the work of the subcommittee has done, like we mentioned, since March. of this of this year since we last met. It will discuss work stream one and work stream two. Work stream one has to do with valuation and value addition of critical minerals and work stream two has to do with the work on monitoring energy transition as it relates to taxation. Um next slide please. Um so we will discuss We introduced the paper, what we have done. The last time we met, we said that work stream one has been divided into four parts. We will discuss progress to date on the four parts on our work stream one. We'll also discuss work stream two, monitoring development as it relates to energy transition in taxation. discussing next steps and seeking guidance from committee members. And then we'll also present a working table of content as it relates to an integrated outline that we will be seeking further guidance from committee members on. Next slide, please. So what have we done? Let's give a bit of background to our mandate on at the 31st section of the the the committee, the subcommittee was established and giving a mandate total to develop practical guidance on valuation and value addition of critical minerals and also to monitor energy. What's happening in energy transition as it relates to taxation. At the 32nd section, the work plan was formally approved in terms of work stream one and work stream two. We are gather here, congregated here today to discuss and give you progress report at this 33rd section of the UNTC. It's anticipated that by October 2027, the first draft of the full guidance on our mandate will be produced. And by the 37th section, the practical guidance will be presented to the committee. The committee has liaised and continue to liaise with relevant committees of the UNTC. It is broadly consulting with other stakeholders as the mandate is being developed. And it is anticipated that we will report at every section of the UNTC. Next slide, please. Progress since the 32nd section, we have had three subcommittee meetings on the 16th of April, 16th of July, and the 16th of September, respectively. The first subcommittee meeting in April, we reviewed the comments received from the UNTC meeting in March. We also retained the full part as we structure on part one or work stream one. of the report. We also discussed the issue of public CBCIR to keep focus on its usefulness in the extractive industry subcommittee. Our second subcommittee meeting was held in July, on July 16. I wish we discussed the outlines that were developed by members of the subcommittee. We also realized and ensured that all of the paths were fully integrated into all of the work streams, as well as existing work of the UN Extractive Subcommittee Handbook and the last subcommittee meeting. And we initiated work on work stream two as it relates to monitoring energy transition as it relates to taxation. Our last subcommittee meeting, we review inputs from all of our subcommittee members that are drafters of the work. We agreed on the integrated opening chapter that we will present today. And we remain subject to revision as we report to this subcommittee. Let's also quickly point out that all of our drafting groups are deeply involved in all of the work of the subcommittee. And like I said, we want to thank them for the time spent in producing this draft report today. Next slide, please. Let's see what we have done. Workstream 1, like we said, we have four parts on our workstream 1. Part one is in its advanced stage that has to do with introduction and context setting. Part two also is in its advanced stage of drafting that has to do with tax relevant characteristics of critical minerals. We have substantially advanced outline in part three that has to do with tax administration issues specific to critical minerals. And there's ongoing drafting of outline as it relates to part four in terms of taxation, value addition, and border issues. Workstream one is on, I mean, workstream two is ongoing. Monitoring developments and developments in energy transition taxation. With specific focus thus far on windfall profit taxes. The monitoring is looking at the impact of revenue on both government as well as investors or investment. Next slide, please. Now, let's give us an upsides a bit on what workstream one is. We have decided to do an integrated guidance product as it relates to the full pass on a workstream one, ranging from market and product characteristics, tax determination on part two of work stream one. Part three, that has to do with workable administrative responses as it relates to tax administration and tax policy guidance. And work stream four, that has to do with processing value addition. Again, we said that our work is building on previous work that has been done under the UN handbook on taxation of the extractive industries. as well as previous committee work, the previous 20, previous committee work that ended 2025. It is consistent. We are applying consistent treatment as it relates to pricing information related party transactions, the critical nature of what we call critical minerals. And we have a balanced text. comparative compliance issues, practical limits of administrative capacity of tax administration, especially in developing countries. Next slide, please. Now, work stream one, part one. Again, let's give a synopsis of what we have done. Like we said, the work stream part one is in its advanced stage. It discusses the importance of evaluation and value addition of critical minerals. Why is this mandate important? We say it's important because of the demand of critical minerals in renewable energy, as it relates to technology, as it relates to digital transformation. For specific commodities, like the paper is looking at lithium and other commodities that are or that have been defined as being critical. Why is it important? Again, the paper is also discussing how the market is opaque. The market is vertically integrated. There are fiscal competitions as it relates to stabilization clauses. incentives given by governments to encourage the exploration and exploitation of these critical minerals in especially developing countries. And obviously, administrative limitations that has to do with comparables, the integrity of data, the scarcity of the minerals, the constraints faced by developing countries, tax administrations. and as well as the capacity issues of auditing that developing countries' tax administration are currently facing. Next slide, please. Next slide, please. Still on part one, the paper is part one is also discussing the challenges that resource rich countries are currently facing. We also, we mentioned the home market are still opaque in terms of prices. Market is still, there's still asymmetrical information in the market. The issue of underreporting of exports, the paper has currently reflected on what's happening in Liberia on our right, I think on your left, it's shown that there's a report that was published in March of 2026 by Forest Trend that shows that between 2021 and 2023, the value of export Vis-a-vis the value of imports into countries by Liberia, there's a discrepancy of 43% in market value is between 2.7 billion US dollars. So the paper is emphasizing the issue of underreporting, and the report highlights that it's largely to do with invoice mispricing. The people is also discussing resource link infrastructure as well as related party transactions along markets that are particularly vertical and vertically vertically integrated. Next slide, please. Still on part one. So there was a discussion on how then we do we define what critical mineral is. The people has taken a dynamic country specific definition and that carries three basic characteristics, the economic and strategic importance of the mineral, supply risk and limitation, as well as security and political risk. So these three characteristics in the context of country specific definition is underpinning the definition of what a critical mineral is. And why is the mineral dynamic, the implication of tax rules as it relates to countries. Again, the paper is looking at not a one-size-fits-all, but what a country uniquely define what a critical mineral is. Today, a mineral could be critical. Tomorrow, the mineral could not be defined as critical. So it underpins what the legislation in a particular jurisdiction define what the critical mineral is. Next slide, please. Part one is us, like we said, is building on previous UN work, UN committee work. It's an extension, and not, it's an extension and where, it's an extension of valuation of critical minerals as enshrined in previous UN UN committee work, especially as it relates to extractive industry taxation. And particularly, it addresses energy transition risks that has to do with market up and offtake, the granting of incentives by countries for the exploitation or for the exploration, exploitation of these minerals. and as well as involving international tax rules as it relates to immovable property. Again, the paper is extending where issues that have not been discussed, critical mineral issues that have not been discussed in previous UN committee work, in previous UN extractive industry taxation, there's an extension that this guidance is undertaken. Next slide, please. The paper is focusing on certain geographical regions, particularly Africa, Latin America, and the Caribbean. If you have read on CRP 17, we said this focus or this scope is non-exhaustive. still seeking further guidance from committee members as well as observers here. It discusses China as a major producer of several critical minerals, but most also it also discusses the significant role of a dominant global refiner and processor that China is becoming. Let's also quickly mention that we We have received a comment from Jan, one of our committee members on annex one of the guardians and people that is being developed and objecting to some of what has been written in annex one of the paper. But we want to comment here in addition to what the Secretary has also written to Jan, that the paper is work in progress. It's not the final guidance. And so all of the comments that we have received or will receive will definitely be taken into consideration during the end product of the work. Again, The focus of the paper regionally is Africa, Latin America, but is non-exhaustive. And further guidance from you is-- we are still seeking further guidance from you. Why we focus on Africa and Latin America? Because it's mostly on the supply side of critical minerals. And then on the supply side is where most developing countries are located. Next slide, please. Part two, like I said, part one and part two, they are in advanced stages of our work. So now part two focuses on tax relevant characteristics of critical minerals. A couple of things that are being discussed, price volatility, again, the opaqueness of the market, long term offtake contracts, variation of the products, related party chains, like we said, the market is hardly integrated, vertically integrated. And part two is also looking at pricing formulas as it relates to quotation periods, benchmark, and where the sources of the information are coming from. Next slide, please. Part two also discusses the mechanism of how prices are being determined. Should they be determined automatically? Should it be accepted from the contract that taxpayer has between the investor and the government, or should it be driven more by evidence-based rule using assess, shipping records, invoices, hedges, and third-party comparables? The paper discusses where pricing information should come from. company internal documentations, third-party documents, open market data, as well as tax authority data. Tax authority means whether it's a customs administration or it's a tax administration or it's an agency that combines both customs and tax administration. The paper also under tax authority data, it discusses CBCR, the limits of data confidentiality that some tax authority places on information that could be accessible to the public. Next slide, please. Eight practical points on pricing, especially for auditors, have been discussed on part two. that has to do with in giving guidance to auditors what should they look up for when price structure or price mechanism of what is being defined as critical mineral is being looked into in terms of the terms and conditions of the contract, the variations in products, treatment of refining cost, penalties, credits, intra-group charges. Again, let's emphasize that the people discusses how vertically integrated the market is. Pricing date, shipment level data, marketing entities, as well as hedging. All of these have been discussed as practical points, practical mechanisms that should be looked up for by auditors when they are going through an audit investigation and they are trying to determine how the price of critical minerals are structured in terms of how the price of critical minerals are structured and how they affect the intake of government's revenue. Next slide, please. There are also three, the paper part two is also discussing what we call fiscal risk and three layer of revenue regime that should be looked for when government is determining what revenue or early form of revenue should come to them as a form of government intake. The first layer that the paper is discussing when for revenue to developing countries has to do with royalty, withholding taxes, ring fencing of areas, mineral development areas. The second layer has to do with corporate income tax. It discusses the capacity limitation and it also has discusses resource rent tax. We also said that the people and like we mentioned in part one, the issuance of tax incentives to learn investors in to the exploitation or the exploration, exploitation of the minerals. What the people is saying that there are earlier forms of revenue that comes to government. and there are later forms of revenue that could be accrued to government depending on the design of the fiscal regime, depending on the design of the contract between the investor and the government. The paper discusses the risks as outlined, incentives, stabilization clauses that are in most contracts between government and investors. It discusses costs that are normally sunk by investors and how to treat those costs between the government and the investor. Transfer pricing issues are also being discussed, and the issue of overvaluation of capital. There are examples, country-specific examples, that the people part two of the people is also all will also discuss again we say those examples will be verified um through broad based consultations and through seeking further guidance from committee members there's a third layer that the people also discussing discusses rather and it has to do with Integrity how to protect both both layers in terms of layer one, early revenue to government and later revenue to government as it relates to layer two. Transfer pricing rules, interest limitations, interest deductibility rules, beneficial ownership rules, transparency, exchange of information, they are all under layer three and they are all being discussed. as issues of integrity that should be looked into by government as they are discussing the issue of critical minerals and how can country gain either an early form of revenue or later form of revenue from profit as it relates to the design of contracts where critical minerals exploitation, exploration are concerned. Next slide, please. There are also constraints. Part two is also discussing, non-exhaustive again, seeking further guidance from the UNCTC. We have mentioned, we have country context thus far from Zambia, Mongolia, the DRC, Indonesia, Chile, they are all mentioned in part two as case studies from countries. But we are welcoming further examples from UN committee members that are relevant to the work of part two of this paper. The paper is also discussing constraints that developing country faces as it relates to reliability of data, country by country reporting again. And the paper is also discussing the possibility of public country by country reporting for the extractive sector. Next slide, please. Part three, we said there is an advanced stage of development of part three on a work stream one that has to do with tax administration issues specific to critical minerals. Part three is discussing institutions and capacity of institutions in developing countries. It is discussing documentation issues and reporting issues. It is also discussing audit tools. On the institutions and capacity, the paper is discussing capacity constraints, both human resource capacity and institutional capacity. that are being faced by developing countries. It's also discussing issues of documentation, related party disclosures, and simplified standards for artisanal and small-scale mining operations. The part three on audit tools is discussing what steps and what particular valuation method that auditors could take when they are going on ongoing and audit investigation. Discussing simplified approaches for low capacity administrations, again, especially in developing countries. Like we said, the detailed outline is prepared, but some contents are still under development of part three of this work stream. Next slide, please. There are coordination and information sources that this paper is also discussing between mining authority, tax authority, and customs authority in a more triangulated manner. In some countries, especially developing countries, the regulator, there's the money authority normally is the regulator, and where there's a difference between the tax authority and the customs authority, how information between these three institutions can be reconciled for information exchange and information dissemination. The paper is discussing data governance, confidentiality issue. Like we mentioned, most tax authority has the issue of data from taxpayers are confidential and they are limited in terms of access by the public and legal basis of information exchange between these three institutions. Sometimes the institutions establish an MOU, they establish protocols and how these can also be channeled to subnational governments. There are tiers of governments, whether the state is a unitary state or the state is a federal state, there are still tiers of government. And there are still issues of how information should be disseminated between these tiers of government that this paper is discussing. The paper, part three of the paper also highlights where information can or could be sourced from as it relates to international pricing data indexes, country by country reporting, again, public country by country reporting, and public contracts. There are instances where contracts between government and investors are available publicly. as well as the reports that come from the international EITI. So all these information sources that are being coordinated under work part three of work stream one that this paper in a draft form is discussing. Next slide, please. Under part four, it's still work in progress, like we said, but part four has to do with taxation, value addition and border issues. But it's more an integrated work on this. It focuses on an integrated work beginning from extraction to recovery of the mineral or other associated minerals to processing. So from downstream to upstream, refining and downstream activities. Part four also look at customs issues. customs classification, customs valuation. It also will look at upstream terms. And it will also consider limits of taxation as should taxation or tax is an enabler to the valuation of critical minerals. The paper also discusses revenue costs of incentives, windfall taxes, energy infrastructure, as well as access to the market. Let's point out again that part four is in draft form, is still under development, and will be reported subsequently during our next UNTC sitting. Next slide, please. Now, so that's part, that's work stream one. Again, let's emphasize that work stream one has four parts that we have just discussed. Part one and two, they are in advanced stages of development. Part three and four, they are still being developed, but all four parts on a work stream one, they are in the draft form. and we are also seeking guidance during this 33rd section. Workstream 2, that has to do with monitoring energy transition as it relates to taxation. Under our approved work plan, we had to discuss fiscal measures affecting critical minerals, carbon pricing interactions, carbon capture, utilization, and storage, carbon market arrangements, transition related tax expenditures. Currently, our focus on monitoring energy transition has been on taxation of windfall profit taxes. We will not be presenting that report, that monitoring report during this 33rd section, but we will report on what during the next sitting of the UNTC. But just to inform this, I mean, just to inform this body that we, sorry, just to inform this body that work on monitoring of energy transition as it relates to wind for profit taxes is well under, on a discussion under work stream two of, of this subcommittee. Next slide, please. So, what are our next steps? Our next steps are to, one, develop, further develop part one to part four of work stream one. We are also to seek verified country illustrations. We mentioned we have some country illustrations already from Zambia, Mongolia, DRC, etc. We are still seeking more country context. We are continuing our consultations with other subcommittees as it relates to the Transit Pricing Subcommittee, Environmental Subcommittee, Committee, Subcommittee on Indirect Taxes and Tax Administration and AI. We are reviewing and will continue to review the sequencing of our mandate. under both work stream one and work stream two. Our next milestones are one, we are ongoing the reporting of our work in progress to date at this 33rd section. It is anticipated that the first draft of this guidance, including the possibility of reporting on the part four of work stream one, will be done during the spring of 2027. And our first full draft, including part four of work stream one, will be reported during the UNTC sitting of October 2027. Next slide, please. Under part one and work stream one and work stream two, there are some open questions that this subcommittee is seeking guidance on. It's a definition of critical minerals that are country specific. It's a workable for the task guardians. We have also said that on the work stream, one that has four parts, we have an integrated outline that will be seen in the annex at the end of this presentation. We are also seeking for the guidance on that integrated approach on work stream one of the subcommittee mandate. On work stream two, we are asking which risks are distinctive to critical minerals and which belong in a general context in this extractive industry guidelines that we are developing. Are there boundaries between parts one to four? Those boundaries, are they clear enough? Especially those of us that have read CRP 17, we'll be seeking guidance from you. Before we thank you and turn to Olivier for any further comments, the next slide shows annex 1. working table of content, the integrated table of content between part one to part four of work stream one that we have developed and we are seeking for further guidance on. Is it complete? Do you think that we need further guidance, further additions, further comments on an integrated approach to work stream one that has four parts? Further guidance is, we are seeking further guidance to the integrated type of content that we have developed under work stream one of our mandate. But from our end, we want to say thank you, again, thank you to all subcommittee members that have been very, very instrumental in working with us to produce this working draft. as we have presented to the sub to the UNTC today. We now turn to Olivier for additional comments before going to the co-chair who will lead in the next section. Olivier.

Thank you, Darrin, and thank you, everyone. Thank you, the chair. I wouldn't make many comments, only just to remind all of us here that The approach we are following on work stream two is consistent with our mandate. And we will, at the next session, we will report on the current situation in terms of global, in terms of taxation of windfall profit, what is happening around the world, what could be the lesson learned, and what could be lesson to draw from that in order to help countries, to assist countries in setting up their policies for, uh, in the area of, uh, windfall tax profit. So this is consistent with, uh, uh, with the, the mandate. We will report on the situation around the world and then eventually, uh, seek the guidance and the direction from the committee to the next step in terms of drawing some type of policy or guidance for countries. So the first step next year will be on reporting on the current situation around the world. This is what I would say. The other point I would like to raise here is the fact that the subcommittee is a diverse group of various stakeholders, and in that respect, some of points which are incidentally raised during our subcommittee meetings may relate to other work done by other subcommittees. So in that respect, when it's time to reach out to other subcommittees, some of those points raised may just be directed to the most adequate subcommittee to, for further discussion or further study. So again, this is the approach which is consistent with our mandate in terms of our coordination, collaboration with other subcommittees. Here, from what our coordinator, Daryn, said, we are going to liaise with other subcommittees, but before we do that, we wanted to make sure that we have concrete steps, we have concrete questions, concrete topics to discuss. So please retain the fact that we did not have any specific meeting, any specific direct relation with other subcommittees because we want to first to make sure that we are advanced enough so that we have substance to discuss with other subcommittees, those mentioned here, such as transfer pricing, for example, environmental and AI. Thank you. Over to you, Chair.

Thank you very much, Olivier and Darlene Stein. I think that was a very, very, do I say exhausting or exhaustive? Which one now? All right, colleagues, we have listened to Darlene Stein, the coordinator of the Taxation of the Extractive Industries Subcommittee. We have the CRP 17. And so let's open the floor now. And then we have questions. Please, can we keep the questions? So if you have any specific inputs, and then if you want to also provide guidance as to the four questions that have been raised, the floor is open. Erin keep please

thank you Matthew I will speak in Spanish when one's gonna.

First I want to thank Darlington Olivier and the team for the document I think that's a guide that addresses a lot of themes in depth some formal comments. I can send them in by e-mail, if you want, to provide clarifications in the document in that respect. I have three substantive comments, one on the social and environmental aspect, which I think the document should address in terms of the topic of critical minerals. supported by Mexican experience. I can detail that. The second issue that I want to raise, which I think you explained in depth, Darlingstone, is what is in section 2.2, opaqueness of critical minerals. Again, I have a recent example from Mexico's experience that I think could enrich the document. Finally, Another point that you mentioned, but which I think the document also mentions, but only in passing in one paragraph, is the issue of tax treaties on the extractive industry. Turning to my first point, in 2023, Mexico conducted reforms to its mining law. That reform sought to recognise the rights of indigenous communities and peoples if, in their territories, concessions were granted. That is a very important topic, because it recognises those communities, which probably whose livelihoods and resources are affected by the fact that they have a concession in their territory, and whose rights will be immediately impacted. The law calls for prior consultations to be held before the concession is implemented, to assess the social impact of granting them certain economic rights in that regard. if a concession takes place there. The mining law of 2023 in Mexico also provides that you cannot conduct concessions in natural protected areas or in territories where there is not sufficient water. The environmental and social themes, when implementing tax policy regarding critical minerals should be taken into account. I will leave it to the opinion of the sub-committee to possibly include a guide in that regard. That could be possible. I think that it is fundamental, particularly for developing countries, to have some sort of guidelines or directive. The second theme is section 2.2, which you addressed, Darlingstone, the opaqueness of critical minerals. In February, Mexico conducted negotiations with the US, or is conducting negotiations this February this year. It is called plan of action on critical minerals. What you raised, Darlingstone, is very important, this opacity of the prices of those minerals. since the action plan is a paradigm for that theme and seeks to establish minimum prices for those minerals. The Mexican experience could be of great benefit, and it could be included in section 2.2 of the document. The aspect of tax treaties is very relevant, especially for developing countries. It is mentioned in only one paragraph. The guide could perhaps shed more light on that theme. Carrying out negotiations that are unfavourable to a developing country could lead to them losing their tax rights to levy or having their rights diminished or reduced. I think that the bill would address that aspect in more depth. The whole value chain is huge when it comes to those critical minerals. There is the UNCTAD document that you mentioned, from 2022. The value is not just in the extraction itself but also The value chain is so huge, and that needs to be taken into account. Usually, that chain is of a cross-border nature, so I think that some more depth on the theme of tax treaties would be important. Those would be my comments for now. Thank you.

Thank you very much, Enrique, for that very detailed intervention. As you have pledged, if you can do some written detailed intervention, that will be very, very appreciated. And on your comment as regard treaty, it's also good that we mentioned the possible pitfalls in negotiating contracts for critical minerals, what to watch out for. What are the options? And that will be very, very useful. Okay. I thought George was raising a flag. Okay. He has changed his mind. Okay. South Centre, please.

Thank you, Chair. Excellencies, ladies and gentlemen, the South Centre, intergovernmental think tank of developing countries with 54 member states from Asia, Africa, Latin America and the Caribbean, is pleased to share its views on the work of the UN Subcommittee on Extractives. We'd like to start by congratulating the co-coordinator, the subcommittee and the secretariat for the work. And of course, South Centre is also involved in this work in the subcommittee. We wanted to mention two specific points. One on public country-by-country reporting. We welcome the mention of public country-by-country reporting in the guidance, and we have questions on what form specifically would this take. And our suggestion is that there can be guidance for countries on how to actually introduce domestic legislation to practically implement public country-by-country reporting. drawing on the legislative framework in the European Union and the domestic law approach taken by Australia, so that there can be some practical guidance to countries on how to introduce domestic law to implement public country by country reporting. That's the first point. Second point is that there is guidance on the reporting format. in this public country by country reporting what data is actually reported, because there's wide variation and the kind of data that is reported is very important. So some guidance on the reporting format specifically would also be quite helpful, and that is something which we would invite the subcommittee to take into consideration. Coming to windfall taxes, we welcome the focus on windfall profits and The current slide seems to say that the emphasis would be on the impact on government revenue and the effect on investment. And these seem a bit premature because both of them actually depend on the design option that is taken. So perhaps it may be more useful to actually begin with what are the design options. and then to go into the assessment of what could be the impacts on government revenue and the effects on investment. And these are also quite speculative and really depend on and quite complicated. So perhaps the priority you could go to actually providing practical design options for windfall taxes and subsequently looking at the effect on investment. So those are our comments. Thank you once again.

Thank you very much. South Centre, Azerbaijan.

Thank you very much, Mr. Chair. We thank the Subcommittee for this work, and we support the focus on practical guidance that helps developing countries protect their tax base while attracting long-term investment. In practice, as a mineral-producing country, we face some challenges for assessing minerals trading, and from that perspective, I will some constructive suggestions for this paper. First guidance would benefit from worked example showing how mineral prices should be adjusted for quality, processing costs, transport and available byproduct. It may also explain what administration can do when reliable market prices are unavailable. And also prices may be in line with market while company structure and actual function still suggest profit shifting risks. It will be useful for guidance to explain how to assess such cases. And second, long-term supply agreements may be assessed using the information and market conditions available when they were agreed. A later increase in market prices should not be treated as evidence of mispricing. Financing, purchase commitments, and risks taken by each party should also be considered. And third, we suggest a balanced discussion of PSA, production sharing agreements, and stabilization clauses. The assessment may consider government's overall return from projects, including its production share, royalties, taxes, and other payments. This will help distinguish legitimate investment arrangements from arrangement that creates tax avoidance risk. And other things, guidance may clearly explain how to separate extraction from processing activities and including the allocation of shared costs and treatment of tax incentives. And CPCR, related to CPCR reporting, I think that it should support risk assessment while any transfer pricing adjustment should be based on detailed analysis of transaction consent. And six is the analysis of windfall taxes should also consider investment cost, previous losses, and combined fiscal burden. Finally, I have a technical point need to be clarified. I think that we have to think on limits of US proportionate profits method, which discussed in 53 of Annex 1. I think that this rule determines gross income from mining for purpose of calculating the depletion deductions. I think that it may not be presented as a general transfer pricing method. Its relationship with the arm's length principle should be explained and justified separately. Thank you very much.

Thank you very much, Azerbaijan. I do want to spoil my bad reputation. So let's go on tea break. We'll come back in 15 minutes. You can keep the flags up. We'll take them as we come. 15 minutes, so we are back by noon for the continuation of this discussion. Thank you very much. Thank you very much, colleagues. Let us pass it. We invite Mbaska to take the floor.

Thank you, co-chair, and thank you to the subcommittee for making this very detailed report. Now, a couple of points before I get to the questions here. Now, when we read the report, especially the annex one, I wonder whether this is more of a, I mean, on the tax issue, is this more of a transfer pricing issue or is this more of a profit attribution issue? Now, I say that for a couple of reasons. Now, transfer price, it has already been mentioned in the annex that there is a lot of opacity regarding data. Now, transfer pricing is subject to the availability of reliable data. If we do not have reliable data or also then it will be very difficult to apply a transfer pricing method correctly. That is one. The other point is that many of these contracts It has already been, it is mentioned very correctly that there is a lot of vertical integration in the contracts related to this particular industry. Now, because of that vertical integration, it is left to the MNE group to structure its contracts the way it likes. So what will happen is that there will be several types of contracts for the same end result. There will be permutations and combinations of contractual terms. Now, when this happens, transfer pricing hits a wall. Transfer pricing, whatever it is, is not very agile. It is bound by certain methods, by certain methodologies, and whenever there is a change in contractual terms, transfer pricing is not able to deal with such issues effectively. So therefore, probably this is This can be dealt less effectively with by transfer pricing and more effectively by by a profit attribution methodology. Now, the advantage if we if we kind of explore the possibility of using a profit attribution methodology is that transfer pricing depends on data that is available in public domain. Profit attribution begins from a different reference point. It begins from a reference point of the final sales being made. One of the things. that data may still be available. And if we insist on that, then the issue of opacity of data can also be dealt with, you know, that final sales data will have to be made available. So, one of the things that I feel is that more than this issue of extractive industries especially when the supply chain is kind of united, one piece of the supply chain feeding into another, the distinction between separate different phases of the process not really watertight, I'm not very sure whether transfer pricing is going to provide us a correct solution to this. We've tried this in the past, and I can say from the experience that I have had, that in cases where there are integrated chains of functioning, transfer pricing does not really provide a correct solution. So probably one of the things that maybe if it is possible, the subcommittee can look at is whether there is a possibility of looking at this, of dealing with the tax taxation issue through a profit attribution principle. That is one of the points. The other thing was one of the questions is that are the boundaries between parts one to four clear? I do feel that there is an issue regarding the boundaries of part three and four, because now part four, I think, deals with tax issues. Now, the subjects that are under part four, to my mind, appear to be related to the audit portion of part three. This is just something that comes to mind. So probably I'm not, there is an overlap, it cannot be avoided, but this is something that I think the subcommittee can look at. So right now, these are the two couple of things that I feel. One, that the tax issue is not really a transfer pricing issue, it is more a profit attribution issue. And maybe we can-- the kind of overlaps that may be there between part three and four could be looked at. Thank you.

Thank you very much, Bhaskar. I'm sure the coordinators are taking note. But maybe just one quick point to clarify. I'm not really sure you can 100% separate issues of allocation of profits particularly to PE from transfer pricing because a lot of time, the principles of functions, asset, risk are always considered. But then be that as it may, I think what I'll probably also ask you is, If you can also provide options, suggestions for the subcommittee to look at, I think it would be a very good one to help to move the work forward. Thank you very much for your input. Wanda, please.

Thank you, Chair.

First, I'd like to thank you for the work you carried out in this area, and there are some points that I would like to make, especially with what has to have to do with the discussions on transfer prices, where some vulnerabilities were identified. And I think what was discussed was very valuable, and it will be indeed the value added, especially if we look at minerals. Now the preset market indicators that were reviewed, the benchmarks that are automated, and also taxation linked to physical values. But here I'd like to make a point, even though it's quite clear countries in Africa and Latin America are moving forward and including methodologies for minerals like the sixth method or commodity methods. There are also some serious difficulties in implementing these methodologies in order to ensure that they are accepted by courts, despite the legislation that exists. There's still quite a lot of difficulties with indicators and the necessary adjustments, the ones that need to be made. So this is all very interesting, but we have to take into account these aspects. And also perhaps we should look at the experience of countries that are implementing the E6 method. So a lot of progress has been made, but there's also a point where we have to think about the way everything is being implemented, something that may create difficulties. So perhaps it is necessary to identify the difficulties at an early stage and then try to look at alternatives or solutions, how they may be dealt with. And for example, the methods, for example, the profit split something that could be a valid approach. But it could be linked to the proposal that is made on the public CVC. And the second point I'd like to raise, it's related to the public CVS. And if we do not have any details on how it will be implemented, how the details will be implicit, for example, action 13. So we can have additional details on all of this, but what I would like to say, something that I believe is important to see what proposals our countries are making when many of these developing countries and they have committed under this inclusive framework on the country-based reports. It's important to keep in mind when these proposals are made and initiatives taken by the European Union or Australia to see how what is being proposed, whether that is consistent with Action 13, and if not, then see what the problems are and what alternatives can be found in order to ensure that countries complied with their commitments. And perhaps they could be part of our discussions. How can we continue these discussions in other forum? if it is found that is important that countries have access to this information, especially if we refer to critical minerals and the mining industry. So these are the points that I wanted to raise and congratulate you on all of the work that you carried out. Thank you.

Thank you very much, Wenda. Mohamed.

Thank you, Chair. I would like to express my support for the subcommittee's work and for the proposed structure. First, I agree that the focus on critical minerals is timely. As the global transition to cleaner energy accelerates, many developing countries possess significant mineral resources, but often face challenges in translating those resources into sustainable domestic revenue and broad economic development. The guidance can therefore make an important contribution if it helps countries address both policy and administration issues in a practical manner. With respect to work stream one, I support the proposed four-part structure. In particular, I welcome the focus on tax administration challenges. Many developing countries face difficulties in areas such as valuation, transfer pricing, verification of production volumes, and access to information across the value chain. It may therefore be useful for the guidance to include practical examples, risk indicators, and administrative approaches the tax administration can apply in real cases. I also encourage subcommittee to ensure that discussion on value addition and broader issues remain closely linked to taxation. While the broader economic and industrial policy context is important, the guidance could particularly be valuable if it highlights the tax implications of processing activities. export restrictions, incentives and other measures commonly used by resource-rich countries. With regard to work stream 2, I support continued monitoring of developments relating to energy transition taxation, including windfall profit taxes. At the same time, it may be useful to maintain a broader perspective and monitor other tax measures that countries are adapting in response to energy transition, particularly where they may affect the allocation of tax rates, tax incentives, or revenue mobilization in development countries. Overall, I support direction of the work and look forward to further development of the draft guidance. I encourage the subcommittee to continue emphasizing practical solutions that can assist developing countries in protecting their taxpayers and strengthening domestic resource mobilization from extractive industries. Thank you.

Thank you very much, Mohammed. Shanice.

Thank you, Chair. I do wish to extend congratulations to the committee, the subcommittee, and the work that it has done. I do believe, as has been expressed, that the work is very timely, particularly as the world changes and evolves in consideration to critical minerals and how they will evolve and their use in technologies evolve. I do believe the guidance as proposed takes several steps forward in terms of how developing countries and tax administration should treat with the matters. I do have some concerns in relation to the application of the guidance because of the definitions in relation to critical minerals. I understand why the approach was taken by the subcommittee to not provide a definition or a list, as we understand that that is evolving. But I do worry, particularly in smaller jurisdictions, that this lack means that there might be some uncertainty, particularly for application purposes. I worry that the investors in a lot of these jurisdictions may be able to exploit the loopholes and the mismatches that exist in interpretations globally. And so I do appreciate why the approach was taken as it was, but I wonder if the subcommittee can consider providing a mechanism where tax administrations will be able to close gaps in interpretation, whether it be from a policy perspective or a legal perspective or some definitional approaches that could be utilized where there is uncertainty in order to break those gaps. However, as it stands, the mechanism proposed does take the work significantly forward. And I look forward to the completion of the guidance and to see how it can be used by smaller jurisdictions to facilitate the development of their regime. Thank you.

Thank you very much, Ms. Shanis. George.

Thank you, Chair. I'll speak Spanish. I do not wish to miss the opportunity to thank all of you for the work that you carried out. It is quite impressive what has been realized in this very short period of time. I do not have meaningful experience in this area of work, but I would like to express that I take a positive view that references are made to the difficulties faced by fiscal authorities and the tax authorities throughout the entire value chain, and I'd like to refer to a follow-up to taxation related to the energy transitions and the windfall profits. I believe that this is very relevant to what we're talking about here today. I think that this is an important question to keep on the table. And from the point of view of transfer prices, I believe that it is relevant to complete the part related to the challenge faced by tax authorities and risks related to transfers related to the extraction of minerals, something I also find to be important. And finally, I believe that we can also include include agreements on prior valuation, something that could be very important for countries that have less resources than developed countries. Thank you.

Thank you very much, George. Wanjiru.

Thank you, Chair, and thank you to Darlingstone and Olivia for the presentation. I appreciated the slide that showed the potential growth in the need for critical minerals globally. which also raises the need for the guidance and the practical guidance that is being developed. I wanted to speak specifically on incentives, and I support the inclusion of revenue implications of incentives, because this will be important to enable governments to analyze, to carry out a cost-benefit analysis of the incentives. And also, while I agree that incentives are base eroding, I think the reality is that they will still be used, especially by developing countries, to attract investment into their jurisdiction. So I think it's important to give guidance, especially on the monitoring of these incentives, so that we make sure that governments are going to be able to analyze and the incentives, how they're being used to make sure that the intended benefit is being received by that jurisdiction. And also, for example, where an incentive would include a timeline. Monitoring is very important to make sure that a multinational, for example, is not just going to shift itself to run out that timeline and then continue to benefit from that incentive. So I think the monitoring of incentives is going to be very important and developing countries need to be guided on that. On public country by country reporting, I think this would definitely promote transparency and would support the need for identification of risks. I think one of the slides showed some major trade misinvoicing, which also leads to base erosion. So I think public country by country reporting would be supportive of this. I think it would also be I would support the inclusion of guidance on the coordination between the different arms of government. I think that's another way of enhancing transparency. And I think all those areas of transparency, like the integration of systems, the coordination between arms of government, public country by country reporting, I think all of them would also act as a deterrent. to trade misinvoicing, for example, because if taxpayers already know that this data is available, then it would probably deter them from carrying out some of these IFF activities. I would also support the inclusion of guidance on the social and environmental impacts of the extractives industry, as raised by Enrique. I think it's important for countries to be guided on how mining activities affect the environment and also the communities that are present around these mining sites and how they can also legislate to be able to address this impact. So I think it would be important also to see the examples of countries that already have this legislation so that we can be able to enhance guidance on that. Thank you.

Thank you very much, Wanjiru. Tanzania, please.

Thank you, Chair. Tanzania congratulates and welcomes progress on work stream one. During our experience as Tanzania, we offer five observations and suggestions to make the guidance more practical. First, Chair, on VAT refunds, developing mines and processing facilities require substantial expenditure before export revenue begins. Refund delays increase financing costs and postpone investments. We suggest guidance on refund timelines, risk-based verification and coordination between tax and customs authorities, protecting revenue while maintaining VAT neutrality. Second, Chair, paragraph 24 of the draft coordinators' report identifies pricing opacity affecting cobalt in the DRC. lithium in Zimbabwe and graphite in Tanzania. Significant mineral resources do not automatically provide access to reliable pricing information. Tanzania is expanding its treaty network and strengthening information exchange arrangements. On this Chair, we suggest practical examples of cross-border information requests in the application of tax treaties, covering of tech contracts, resale prices, financing and related party charges alongside affordable sources of reliable comparables. And third, Chair, paragraph 55 is relevant to Tanzania's compulsory beneficiation policy. Our domestic framework provides for domestic beneficiation facilities to all mining companies. We believe domestic processing can improve access to mineral content, recovery and processing cost information. And on this one, Chair, we suggest work examples showing royalty valuation points, allowable deductions and allocation of income and cost between integrated mining and processing activities supported by information sharing mechanisms between mining, customs and tax authorities. On fourth, on incentives and contract design, in Tanzania, we have framework agreements which incorporate government participation through a 16% free carried interest alongside taxes, royalties, and other instruments. We have withholding tax case experience such as one related to a gold mining company, demonstrating the importance of clear fiscal clauses and evidence identifying services supplied. To ensure this work stream brings impact to domestic revenue mobilization, in developing countries like Tanzania, Chair, we suggest subcommittee's guidance on a contract review checklist and financial modeling examples addressing stabilization, related party pricing, financing, deductions, and the combined fiscal efforts of incentives and state participation. Fifth, under Section 322.4, construction study incentives for imported equipment and technology should receive closer attention. Import tax exemptions do not eliminate evaluation risk. Inflated acquisition costs can subsequently increase depreciation and related party deductions. On this, we suggest that the subcommittee provides guidance on valuation checklists, separation of equipment from technology and service charges, and reconciliation of customs declarations, asset registers and income tax returns, including subsequent verification of exempt inputs. Chair, Tanzania expressly confirms its readiness to contribute practical experience to the subcommittee, particularly work stream one. We are ready to provide the country's examples, lessons from implementation of mining agreements and tax disputes, and written and oral technical inputs. We therefore welcome participation in relevant drafting discussions and opportunities to learn from other countries. I thank you.

Thank you very much, Tanzania. Hector.

Thank you, Chair, and thank you, Darling, for excellent work on a very important topic and a very important source.

Of revenue.

I was.

The Australian country by country, public country by country reporting regime has been mentioned a couple of times.

So I thought I would just briefly update that. Obviously, it is a new regime, and the first reporting is due or expected by the end of this calendar year. So, perhaps once that first set of data is released between now and the end of the year, that might provide some assistance in the context of the paper.

Thank you.

Thank you very much. Sierra Leone.

Thank you, Mr. Chair. Sierra Leone would like to join Tanzania in support for the four-part structure of the practical critical mineral guidance, and we welcome the proposal that emphasize strengthening cooperation between tax administration customs authorities and mining regulators. In many developing countries, different government institutions collect information on mineral products, export quantities, product quality, and declared values. However, where these institutions operate independently, differences in reported information may go undetected, creating opportunities for revenue losses. So we therefore recommend that the guidance include practical procedures for sharing information, reconciling production and export records, and conducting joint verification exercises. For Sierra Leone and other West African countries, stronger institutional coordination could improve the monitoring and mineral exports and help ensure that taxes and royalties are assessed using accurate information. Thank you.

Thank you very much. Again.

Thank you, Mr. Co-Chair.

Hello to everybody today since it's the first time I speak in public or in the open session, put it that way.

Thank you, Darling Sten, for this important work indeed.

I welcome the practical side as well and the integration of country examples and real-life examples.

On which the work can be based.

I also wanted to support what Enrique said in his comments, the importance of the social aspect of things.

And I guess this is an.

Illustration of basing the work on practical examples, and in this case, the practical example of Mexico.

The issue with indigenous communities, the comparison, the experience of the negotiations with the US and the opacity of.

The mineral, the pricing. And then finally, the important link that with tax treaties, of course.

There's quite a few of us that are tax treaty people here.

And I could only support more work on that.

Thank you very much. India, please.

Thank you, Chair. India supports the work of the Subcommittee, and many congratulations on the progress so far. A couple of points that I'd like to bring up. This is particularly in regard to part four of the Subcommittee's work, vis-a-vis how location and nature of value creation will affect royalty and other payments. It has been our experience that the payment of royalty and FTS are ways in which the tax base of the source country is very easily depleted. And the payment of royalty does not have much to do with the value of the minerals so mined, but in the nature of the contract that is signed. So especially if you add technology royalty payments with fee for technical service payments. This together, irrespective of the extraction activity carried out in the source country, become ways in which profits are extracted out of that source country. The FTS plus royalty plus a strict FAR-based approach for profit attribution may give rise to the same problems in the future in terms of not being able to tax profits where they arise, not being able to tax profits where the economic activity so takes place. It has been India's consistent stand that market-related factors should be taken into consideration in attribution of profits. And if there is one particular industry where market-related factors will have to straight up be considered, it is the mineral extraction industry. The other aspect I would like to point out is in part two, where you say that no single valuation method is being proposed. I was wondering if even if you do not propose a single valuation method, will there be a broad guidance framework as to the approaches to valuation that countries could take up? Because this is something that I think will apply to most countries that The government is a co-signee in most of these mineral extraction contracts, and the government agency that is signing the contract is not the tax authority, and the tax authority gets to examine that contract only much after it is signed. So if there is guidance on how the contracts could be designed in a manner to be able to recognize value creation in the place of extraction or in the source country. And so also to give guidance on how valuation of the minerals could be incorporated into that contract that the government of the source country will be signing with, say, an international service provider or an international company. These aspects, if the subcommittee is working on or might want to look at, this is what I wanted to say. Thank you.

Thank you very much. Eamon.

Thank you, co-chair.

I just wanted to intervene briefly to.

Thank Darlingston for the excellent presentation and also to echo the words of Enrique in reminding us all of the need for co-ordination between subcommittees, and in particular, in this case, the work of the subcommittee on the UN model tax convention and the upcoming work stream 2 of that subcommittee in relation to various definitions, including the definition of immovable property, which covers consideration for the working of the right to work mineral deposits, sources and other natural resources.

To the extent that that area is being examined, I think it would be extremely valuable to have.

The input from the extractive industries sub-committee. I know that there is overlap between the membership of both sub-committees, but I think that that is an aspect.

To keep in mind as we.

Go forward with our work.

Thank you very much, co-chair.

Thank you very much. We have a flag on the academia. Yes, please go ahead.

Thank you, Mr. Chair. My name is Anne Tewes. I am teaching environmental tax law at the University of Leuven, and I'm a member of the Subcommittee on Environmental Taxation. I'm also a former member of the extractive subcommittee, and let me just commend Darlingston on the great presentation and the subcommittee on the great work done so far. It's good to see that there is ample attention given in the presentation and in the work to coordinating information from other sources. Some of the commentators have confirmed that that is something to be done. In the work that has been done in the past on the extractive industry taxation group, it is clear that ministers of energy and mining, as well as organisations such as the Extractive Industry Taxation Initiative, have very relevant information that can be used. If you have limited resources at your disposal, all that information is helpful. Getting practical guidance on how that information can be accessed and how coordination can be done is very valuable. It's also good to see that there is a lot of building on existing work because the subcommittee has done a lot of work already. and for the part 4, where there is an indication that there is going to be looked at for fiscal terms in work that still needs to be done, I just want to make sure that there is ample consideration given to the work that was done so far on decommissioning and restoration. Some commentators have already mentioned that there is an environmental potential impact on working with rare earths, and so Making sure that your decommissioning and restoration clauses and terms and compensations are clear up front is going to help both the country, the resource owner, as well as the investor. I also want to point out that, and we will talk about it tomorrow when we do environmental taxation, there is a piece of work that is being done on land use. And so the choices made on land use and whether tax has relevance there. So on the limits of tax, people pointed out on the environmental, on the social choices on to make around what you use your land for and whether that has a fiscal dimension. There's some work being done in the environmental subcommittee. So we already reached out and connections has been made to the, this subcommittee. So we'll probably have further work done there as well, if that helps and comes a little bit in a response to some of the questions that were made earlier in this work. I look forward to picking that up with the extractive industries sub-committee. Thank you.

Thank you very much. ITTC.

Co-chairman. For some of you who may not be familiar, ITIC is an educational organization that presents a consensus view of the many of our sponsor companies who are multinational extractives companies and energy companies. And in that capacity, it is a privilege to serve with the extractive subcommittee in developing this work and just had a few comments. First, to reiterate Olivia's point that this is a diverse group that's putting together this material, presenting balanced perspectives of the various industry members, prospective investors into the countries, as well as the government representatives. So we're getting a good mix of opinion on the issues. And then to reiterate the point about previous work, In addition to looking at the transfer pricing work that's been undertaken and the work of the previous committee in the minerals valuation, we also will be focusing on tax incentives work that's contained within the handbook on extractive industries. And just in terms of the challenges, and I know this is a point Darlington made, You know, the increased, the potential 40-fold increase in demand for minerals such as lithium is going to really rocket the price upward on some of these as we progress in time. And that, of course, is a huge amount of value to be captured by the countries and creates a real tension in terms of the administrative, technical ability available, administrative burden on countries. So we will definitely be looking at how we might develop capacity and that kind of feeds into point to part three about technical knowledge and you need to to build on on what's already in place in various countries and how we can enhance that. Finally, in work stream two, the word windfall profits tax work. Again, this will be a balanced bit of effort and and to to make the point there, there actually is some history with windfall profits taxes. So we will be able to draw upon the work that's the successes and challenges around that and coming to a not a necessarily position, but the broad perspectives on how this might work. And just finally, I guess just to reiterate Anna's point that is important as we look at some of the other issues in Workstream 2 that we will coordinate on energy transition and other and critical mineral space with the environmental subcommittee. Thank you very much.

Thank you very much, ITIC. India, is that another flag or the legacy one? Okay. All right. Thank you, colleagues. I think we have had very deep discussions of this presentation from the Taxation of Extractive Industries Subcommittee. they have asked for questions. I think in some of the responses, there have been suggestions in some of those suggestions. We will still be glad to, if you have more input to do, to send them in writing. But let me return to Daniel Stein and his team. for any response to the feedback you have gotten.

Thank you, thank you, Matthew, and thank you. Thank you, colleagues. Quite detailed input, comments, suggestions that we have received, and we want to say thank you, thank you for them. some of them will be forgive me if I not I won't be specific on some of them but glad that Olivia is here as well we have taken detailed notes of all of the comments that have been have been discussed just so quickly respond to some of them and though Enrique has talked about the issue in Mexico, especially granting a concession agreement at the central government level, but not with the involvement of community members that actually own ancestral land. that issue, I know, is prevalent not only in Mexico, but other developing countries, especially my country, Liberia, that's an issue that we constantly discuss. And thank you for bringing that to the attention that we need to deep dive into it further. I know at some point in Liberia that community members have uprightly refused the concessionaire from having access to the land because they were not participants to the negotiation that granted the concession to those lands. So the investor again had to go and pay or renegotiate for those lands that were initially negotiated at the central government level. So I know it's quite prevalent, it's quite a challenge. Yeah, but we thank you. We will consider that as in our subcommittee and further discussing the issue. And we will also welcome, like Matthew said, the co-chair said, examples, written examples from Mexico, Enrique, that will enrich the work of the subcommittee. We welcome the remarks from South Center. that has to do with public CBCR on the specific guidance of what CBCR will look like in the final product. Thank you to Hector that he said he will provide us that example from Australia that will further and provide information and guidance to the work that we are doing on CBCR in in our mandate. On the issue of wind for profit tax, as we monitor wind for profit tax in some countries, like I said, it's an evolving process of our monitoring that we will report on during our next reporting at the UNTC. But we welcome the remark from the subcenter Azerbaijan made some substantial comments as it relates to practical examples on mineral pricing, suggesting that we include practical examples on stabilization clauses, production sharing contracts, separating extraction and extraction exploration initiatives from and from processing. In other remarks, especially as it relates to paragraph 3, an alternative to consider in, Olivier probably would like to comment on paragraph 53 that Azerbaijan raised before I continue. I wasn't too, I didn't understand quite rightly what he was recommending. Um, so let's, let's turn to you. Um, you could just talk about it before we continue.

Thank you, darling. So just if I got it right from, going from, uh, Azerbaijan, the issue on, uh, uh, proportionate profit method, uh, is that, Some of the issue might arise from the fact that when you implement such method, countries may be at less, may get less of the proportion of the profit to be split through various steps of, through various actors. For example, when you use hubs and, uh, they, uh, they take a good proportion of the profit, then what is left for the country is almost nothing in terms of, uh, when you compare the, the, the, the effective of, uh, say, the number of employees at the hub, which might be just three, and, uh, maybe taking, uh, a rather bigger proportion, where the number of employees at the country might be huge and take the same proportion or even less. So that method also has its own shortcomings. So I think that was the issue raised and we need to pay more attention to that. If you allow me, Darlington, just to make a short comment on the issue raised by Bashir, the fact that on profit profit attribution method, uh, that's can, uh, in fact, uh, help, uh, buffer some of the, the lack of, uh, data in terms of, uh, transfer pricing, but at the same time, it doesn't totally alleviate that issue of, uh, several step and several, uh, actors, which some may be just created artificially just to, to shift profit. So, uh, this is, uh, an issue, uh, which will also be paid attention to, especially in the part four of, uh, of, uh, this, uh, work when we talk about, uh, value addition, uh, how, uh, what could be the, uh, the, the, the, the, the input or the, the impact of, uh, uh, uh, creating more value at the local levels such that, uh, the issue of, uh, transfer pricing is less, uh, felt at the local levels because if there is just leakage between two companies which are all localized in a, uh, in the mining country, then what you don't get from company A, you will get it from company B if both companies are localized, uh, in the country, so that might be one of, the issue, it may also have its own shortcomings in terms of value addition. It's not overnight creation of local processing capacities. It takes time. But what could be the right taxation policy to help or to increase, to incentivize such implementation, such development over time? So that's what I have to say. Thank you.

Thank you, Olivier. I think he also mentioned the issue of reliable data. I think it's part one or part two discusses the issue of data, the issue of data integrity, the reliability of data, and the sources of data that could be useful to developing countries. overlap duplications that's why we mentioned part one to part four of workstream one will be fully integrated to avoid duplications and overlap so the the subcommittee and thank you for re-emphasizing that the sub and subcommittee is fully aware and will endeavor to ensure that duplications and overlap between part one to part four of work stream one are avoided. Wanda mentioned the safety method of TP and its difficulty in being implemented by developing countries. So the SC will also look at that. I know some committee members, subcommittee members have also mentioned that. We also discussed the issue of public CBCR. So, we don't want to delve on that again but it's an issue that that I mentioned the people has considered the method the design of it, further guidance will also be provided as the paper is being developed. Um thank you to Mohammed that has put giving broad support to both workstream one and workstream two. Um of the of the paper. And I'm wanting to ensure that we pay more attention to issues such as tax tax incentives. That might have the potential to erode the tax base and provide more revenue. Domestic resource mobilization to developing countries. Um Shanice mentioned that we didn't, the people has not thus far provided frame guidance on what the definition of critical mineral is. We thought that critical mineral, it was widely being supported that critical mineral is more, should be more country specific, have a more country specific definition, right? Instead of one size fit all definition, but we will provide more guidance to it. Time is not in my favor to discuss detailed points raised by Hoge, Rangeru, Tanzania, Hector, our colleague from Sierra Leone, Guian, colleague from India, and Emon, Long. So, but all of these comments were taken into consideration and they will be discussed in more details during our next subcommittee meeting which I think has been proposed to occur on November 19. But once again, we welcome and thank you for those valuable input, valuable comments. The subcommittee will endeavor to take them into consideration as it continue to work to provide a more practical guidance on value addition evaluation of critical minerals as is amended as um or has detected but thank you um co-chair and thank you um for this for this time.

Thank thank you very much um dalestein um who will have sent all the worms in our Tommy after you if you had delayed for another one minute um anyhow let me give um the floor to the secretariat for housekeeping because we have just one minute. We'll take all of that information when we come back.

Thank you so much, Chair. Just to announce for the lunch break, there are a couple of options for participants. There's the main cafeteria that's over there in building A on level zero. Please bear in mind the kitchen closes around 2:30, so you want to get there in the earlier part of the lunch hour than the latter. There's also another area called the Concordia Bar, which also has some lunch options and coffee. That's in Building A on level two, also in this direction outside. Thank you.

Okay, so bon appetit. Please, we come back 3 o'clock.