Mining Companies Make A Significant Economic Contribution To The World Economy –

Sourced from International Trade

By Bob Northgate

The taxes and other contributions to government that mining companies pay are an important element in the creation of prosperity and stability of the countries in which they operate. However, the full extent of this contribution is not always recognised. PricewaterhouseCoopers’ second Total Tax Contribution (TTC) study of the global mining industry aims to bring greater transparency to the full economic contribution that these companies make by providing data on all taxes and other payments made to government.

The results show that mining companies make a large economic contribution to public finances in relation to the size of their operations. On average, the companies participating in the study paid an amount equivalent to 15.3% of their turnover to government, comprising 10.8% in amounts borne and 4.5% in amounts collected. These companies pay many other taxes and contributions in addition to corporate income tax which, on average, represents only 40% of all the taxes and contributions they bear. For every $1 of corporate income tax paid, these companies pay another $1.50 in other taxes and contributions borne, plus $0.52 in taxes collected.
Susan Symons, global Total Tax Contribution leader, PricewaterhouseCoopers comments:
“There is increasing pressure on both government and business to increase transparency in the extractive industries, with a call for companies to ‘publish what they pay’, and for governments to ‘publish what they receive’, and how they use these revenues.
The mining industry, perhaps more than most other industries, remits large amounts of non-income taxes to various levels of government in the form of employment taxes, royalties, VAT/sales/use taxes, infrastructure funding and other levies. The income tax portion of a company’s financial results is highlighted in its financial statements, but other taxes and payments are not segregated in its results, thus diminishing what it appears to pay to government.
The TTC Framework, used in this study, goes beyond income taxes to collect data on all taxes and other payments to government to give a wider view of the entire tax burden of an enterprise. It provides a good basis for mining companies to report all the various taxes and contributions they make, in a non-tax-technical format which is relatively easy for all stakeholders to understand.”
The study covers a turbulent period, which saw the advent of the global financial crisis and a fall in commodity prices. The impact of the downturn on the mining sector is reflected in the study results, with an increase in the Total Tax Rate (TTR) – the tax cost as measured in relation to profitability. The average TTR for mining companies increased from 32.2%, when the first study was conducted a year earlier, to 39.3%.This is because, while taxes on profits may fall with lower profitability, other taxes and contributions (which are not linked to profits) do not fall and thus become relatively more expensive.
The companies participating in the study reported total figures for turnover of US$62.9bn, wages and salaries paid to employees of US$6.0bn, and a total contribution to government of US$10.1bn. The average total contribution to government by a company in a country reported in the study was US$190 million, comprising an amount of US$146 million borne and US$44 million collected.
Jason Burkitt, UK mining leader, PricewaterhouseCoopers said:
“Mining companies extract natural resources and as a result are naturally the subject of intense scrutiny from government, civil society organisations and other stakeholders. They are large employers and on average, for companies in the study, employment taxes were $15,349 per employee. This is an indication of the direct benefit to public finances of each job created or maintained by these companies. All companies are coming under increased public scrutiny regarding the taxes they pay, and mining companies are at the forefront in this debate. Mining companies pay taxes throughout the life cycle of a mining project, and pay many other taxes in addition to corporate income tax, including employment taxes, property taxes and indirect taxes. In addition, mining companies often make significant further contributions to government finances through sector-specific taxes, royalties and levies, and contributions to local infrastructure such as roads, schools and housing.
“Our work on tax transparency shows that some mining companies are including TTC data in the communication of their tax affairs and leading the way in corporate reporting for tax.”

You may download the full text of the sturdy HERE