![]() ![]() Transfer pricing is when a company sells goods or services to related divisions or companies under the same ownership umbrella at a manipulated price, or funnels revenue through a subsidiary set up in a tax shelter.Ĭarrying out a transfer pricing audit can take up to 18 months of rigorous work as auditors look through a company’s financial records, organizational charts, and other documents and gain access to international lending databases. ![]() In particular, they provided guidance on how to carry out transfer pricing audits, which is what ultimately led to the $228 million settlement. Once these teams were in place, international experts trained members to look for, gather, and analyze different types of information. So the partnership first advised the government on how to build and staff tax departments dedicated to compliance, audits, and specific tax rules. One thing was clear from the start: Mongolia’s tax agency was underfunded, understaffed, and lacked the expertise to effectively oversee multinational corporations. So Mongolia enlisted the help of various international tax groups to “modernize its legal framework, build capacity to tackle complex tax schemes and to implement the international standards on transparency and exchange of information (EOI) for tax purposes.” If all things went according to plan, this revenue could boost public spending on things like education, health care, and poverty reduction.īut the mine failed to yield much financial benefit for the government over the next several years, despite Turquoise Hill eventually announcing more than $1 billion in annual revenue from the project.Įven when accounting for the loans Turquoise Hill provided to finance Mongolia’s share of the construction costs, things didn’t seem to add up. Mongolia would get a portion of sales generated from Oyu Tolgoi’s minerals, while also raising money through taxes on Turquoise Hill. ![]() In 2009, the Canadian mining company Turquoise Hill, which is owned by the conglomerate Rio Tinto, signed an agreement with the Mongolian government to manage and operate the Oyu Tolgoi mine, one of the world’s largest sites of copper and gold. An estimated 65% of families struggle with food insecurity and the government spends less than half the global average on health care. In fact, nearly one-third of Mongolians live in poverty, while another 15% are perilously close to falling below this line. Mongolia is sometimes referred to as “Mine-golia” because the country possesses trillions of dollars worth of copper, gold, silver, and coal deposits, along with other minerals.ĭespite having opened up its natural resources to multinational corporations for decades, the country has yet to reap the rewards. This deprives governments of money that would otherwise be spent on education, health care, transportation, electricity, shelter, and other services. Global tax evasion costs countries more than $500 billion annually, with developing countries losing more than $100 billion. If the $228 million was collected at the time it was owed, Mongolia could have doubled its spending on health care and education. Mongolia recovered $228 million in evaded taxes from the mining company Turquoise Hill and prevented the company from writing off $1.5 billion in taxes going forward. 3 Key Things You Should Know About Mongolia’s Tax Win The successful outcome shows that curbing tax avoidance can facilitate the global fight against poverty. The case happened to be the initial fruits of a campaign to strengthen the country’s tax system through a collaboration with the Organization of Economic Cooperation and Development, the United Nations Development Programme, and other groups. So it was a big deal when Mongolia - not long after a financial crisis - announced that it had recovered $228 million in owed taxes from a multinational mining giant in 2019. ![]()
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