The International Council on Mining and Metals (ICMM) published two reports that highlight the contribution the mining industry makes to the economic development of host countries.
The Mining Contribution Index (MCI): 5th Edition and ICMM Members’ Tax Contribution Report: 2019 Update reports demonstrate the pivotal role mining plays in many national economies, and the contribution it makes throughout commodity cycles. ICMM members commit to pursue continual improvement in social performance and contribute to the social, economic and institutional development of host countries and communities.
The Mining Contribution Index
This report shows that between 2016 and 2018, many of the world’s poorest countries relied on their income from mining as the primary driver of economic activity. As a result, 21 of the top 25 ranked countries in this edition qualify as resource dependent using the criteria applied in ICMM’s Social progress in mining-dependent countries report.
Published every two years, the MCI ranks 183 countries from across the world according to the relative importance of mining to the economy of that country. The fifth edition saw seven new entrants to the top ranked 25 countries, with Suriname and the Democratic Republic of the Congo retaining the top spots. Across all five editions of the MCI, the top 25 remain dominated by low and middle-income economies.
Notably, six of the seven countries that dropped out of the top 25 in this edition were African, a contrast to the increase in African countries within the top 25 in the previous edition. These changes were due to a recovery in gross domestic product (GDP) across the continent between 2016 and 2018.
The fifth edition of the MCI confirms that many of the world’s most mining dependent countries continue to rely on their natural resources as the primary driver of economic activity. The Natural Resource Governance (NRGI) Institute’s Resource Governance Index rates 84% of the top 25 ranked countries in the MCI as weak, poor, or failing. It is therefore clear that there is more to do to ensure that mining’s contribution to national economies is maximised and that mineral wealth translates into broader-based economic and social progress.
The ICMM Members’ Tax Contribution report: 2019 Update
This report, prepared by PwC, extends the dates covered by ICMM’s first Members’ Tax Contribution Report, to include 2018 and 2019. Over the full 2013 – 2019 commodity cycle, ICMM member survey participants reported corporate income tax payments of US$96.6 billion and royalty payments of $56.7 billion, totalling a contribution of $153.3 billion to public finances. During those seven years, for every $100 of profit before impairments(when a fall in commodity prices results in the value of a mine being lower than the current valuation in the company’s financial statements), $39.40 was charged in corporate income tax and royalties.
The 2019 update of the ICMM Members’ Tax Contribution report shows that after a decline in the first half of 2016, commodity prices recovered, and, together with general economic growth, led to an increase of tax and royalties. However, even in 2016, when some members were making little to no profit, they still paid $5.5 billion in royalties, thus providing a dependable stream of revenue for host governments through the cycle.
In 2018 and 2019, the members of ICMM which completed the most recent survey reported total corporate income tax and royalties of $25.5 billion and $26.8 billion, respectively, which was an increase from $17.3 billion in 2017.
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“Taken collectively, both reports paint a picture of the contribution mining makes at a national level,” says ICMM director of social and economic development Nicky Black.
“We know from the Social progress in mining-dependent countries report that responsible mining can be transformative, leading to substantial reductions in levels of poverty and overall improvements in social wellbeing. Mining companies stimulate economic activity by providing exports, the revenue from which can be invested in education, healthcare, infrastructure and supporting government.”
She added that ICMM members recognise that efficient, effective, transparent, and stable resource governance is critical in ensuring that mineral wealth translates into broad-based economic and social progress. Through these reports ICMM hopes to encourage evidence-based debate and focus attention on the vital role of effective mineral resource governance.