The International Council on Mining and Metals (ICMM) published its first tax survey results which show the amount of corporate income tax and royalties members paid between 2013 and 2017.
The report, prepared by PwC, shows that despite volatile commodity prices over the last five years, the 20 members of ICMM which completed the survey reported corporate income tax payments of $72.5 bn and royalty payments of $36.3 bn, making a total contribution of over $100 billion to public finances in the 50 countries they operate in.
Over the last five years, the ratio of tax and royalty charge to profits before impairments was 43.4%.
Impairments arise in the industry when a fall in commodity prices results in the market value for a mine being lower than the current valuation in the company’s financial statements.
For every $100 of profit before impairments, $43.40 was charged in corporate income tax and royalties.
This ratio reached 65% in 2016. It has not dropped below 39% over the last five years.
The report also highlights that half of the payments to governments were in royalties, which do not fluctuate as much as taxes.
This is especially important to low and middle-income countries as it gives greater stability and enables host countries to diversify their economies and invest in social programmes.
Natural resources such as metals and minerals belong to a country’s citizens and extraction of these resources can lead to economic growth and social development. However, when poorly managed it can lead to corruption and even conflict.
More openness around how a country manages its natural resource wealth is necessary to ensure that these resources can benefit all citizens.
For this reason, ICMM is a leading supporter of the Extractive Industries Transparency Initiative (EITI), a global standard to promote open and accountable management of natural resources which includes a requirement for companies and countries to be transparent about the taxes and royalties that are paid and received.
Support for EITI is a condition of ICMM membership.
For low and middle-income countries, revenues from the mining sector are particularly important.
Research published earlier this year found that when viewed through the lens of the UN’s Sustainable Development Goals, social progress was fastest in mining-dependent countries.
People in the 25 countries that are mining-dependent are now generally healthier, better educated, and enjoy improved access to affordable and clean energy, water and sanitation, and telecommunications and financial services.
The tax report also notes that growth of the mining sector through new investment will improve living standards in some of the poorest countries in the world.
“These tax and royalty payments are obviously significant, but they are just one way our members contribute to the countries where they operate,” comments ICMM CEO Tom Butler.
“For example, ICMM members spend a similar amount on locally sourced goods and services which has direct, indirect and induced beneficial impacts in the local economy.
“These payments together with investment and spending on skills development, healthcare and major infrastructure projects have the power to transform lives and enable host countries to diversify their economies,” Butler continues.
“This study demonstrates the contribution that the mining sector makes to the public finances around the world, particularly in less developed countries,” says PwC minging leader Jason Burkitt.
“Continued engagement between the mining sector and governments will be key to ensure that tax policies strike the right balance between raising revenue and encouraging future investment,” he adds.