Extractive windfalls and profit shifting risks

Rising global extractive commodity prices, driven by the energy transition and geopolitical shocks, are generating trillions of dollars in windfall revenues for extractive industries. These revenues could provide a major opportunity for resource-rich developing countries. Yet, new evidence shows that a significant share of windfall profits is shifted to tax havens, undermining fiscal gains.

• Extractive multinationals declare most of their profits in producing countries, but a significant share is still booked in tax havens (18%), where real activity is limited.
• Profit shifting intensifies during commodity booms : about 17% of windfall profits between 2016 and 2023 were reallocated to havens.
• Fiscal gains vary across sectors: mining revenues are far more responsive to price increases than oil and gas.
• State capacity plays a critical role: higher-capacity governments capture significantly larger windfalls.

These findings have direct policy implications. General instruments such as the global minimum tax may be insufficient to protect extractive revenues. Enforcement must be counter-cyclical, with particular attention during price upswings. Fiscal design should reflect both sectoral dynamics and state capacity, and governments must weigh the broader question of whether to rely primarily on extractives or to diversify fiscal bases. Finally, special windfall or excess profit taxes can play a role but require robust anti-avoidance safeguards.