OECD: Ring-Fencing Mining Income: A Toolkit for Tax Administrators and Policy-Makers
SDG 16: Peace, Justice & Strong Institutions
Institutions: Ministry of Finance; Ministry of Mines
This toolkit explains “ring-fencing,” a tax policy requiring that deductions and income be assessed on a project or activity basis - preventing profits from one mining project from being offset by losses from another or non-mining activity. It argues that ring-fencing accelerates government revenue, protects tax bases from permanent losses, and promotes investor fairness by curbing base erosion and profit shifting.
However, the practice note also highlights risks: it may discourage investment in marginal projects, increase compliance and administrative burdens, and require intricate apportionment rules.
The report offers guidance on designing ring-fencing rules: determining what activities and taxes to ring-fence, when exceptions are justified, and how to handle losses, derivative transactions, and revenue sharing. It stresses that ring-fencing should be selectively applied - when governments need early revenue, face BEPS risks, or seek equitable fiscal outcomes - and that design preconditions (e.g., administrative capacity) must be assessed first.
Follow the full report here: