Resource-rich countries can collect revenues from natural resources to support economic development and structural transformation, although often the revenue potential is not fully realized. Profit shifting often poses a challenge undermining the ability to effectively apply the fiscal regime.1 Multinational enterprises through tax planning and transfer pricing may shift profits away from the source country, conflicting with the government’s objective of collecting a fair share of economic rents realized from the resource extraction. Further complicating this, the concept of where value is added as natural resources are extracted is not always straightforward to establish.

Why Reform Is Needed and How It Could Be Designed