Ontario mining industry strikes gold - in the taxpayers' wallet

October 29, 2002

The cost to provincial taxpayers for the care and feeding of the Ontario mining industry has increased by 58% since 1995, while the industry is delivering in return fewer jobs, lower royalties and reduced economic activity, according to a new report released today by MiningWatch Canada and the Pembina Institute.

"The richest vein of gold the Ontario mining industry has ever tapped they discovered in the provincial taxpayer's arm," said Joan Kuyek, National Co-ordinator of Mining Watch Canada.

"Looking Beneath the Surface" quantifies both the public costs to support the Ontario mining industry and the benefits generated by the industry in fiscal years 1994-95 and 2000-01.

The report found Special tax holidays and tax exemptions in Ontario increased 166% from $12 million in the fiscal year 1994-95 to $32 million in fiscal year 2000-01. The special deals for the mining industry included the New or Expanded Mine Tax Holiday, the Remote Mines Tax Holiday, and the Basic Mining Profits Tax Exemption. The Flow-through Shares Tax Credit benefits to the mining industry were not included, as Ontario officials were unable to specify the amount of foregone tax revenue.

Total special provincial spending and tax breaks for the Ontario mining industry (in constant dollars) increased by 58%, from $42,733,301 in 1994-95 to $67,406,865 in 2000-01, the latest year for which statistics are available. (The Ontario mining industry gets additional tax breaks and direct support from the federal government.)

During the same period, benefits from the mining industry decreased, the report found.

  • Jobs declined 20%, employing 9,844 people in fiscal 2000-01, down from 12,308 in fiscal 1994-95. The 20% decline in mining employment occurred while all-industries employment in the province was increasing by 15%, from 4,181,005 to 4,791,699.
  • Royalty payments are down 45%. The provincial treasury collected $52.7 million in fiscal 2000-01, down from $96.7 million in fiscal 1994-95.
  • Contribution to provincial Gross Domestic Product shrunk by 24%, from $2.6 billion in fiscal 1994-95 to $2.0 billion in fiscal 2000-01. The most recent figure represents about one-half of one percent of all-industries GDP. The 24% decline in mining's contribution to the provincial GDP occurred while all-industries GDP increased by 23%.

"Our report found that the Ontario mining industry is no longer an effective generator of jobs or economic development. The industry appears to be addicted to constantly larger transfusions of public cash and tax breaks to look for new mines, while older mining-dependent communities decline," Ms. Kuyek said.

In addition to the public costs already detailed, potential public liability for cleaning up closed or abandoned mines totals nearly $900 million. The total consists of public liability to clean up known abandoned mines in Ontario ($450 million) and potential liability to clean up operating Ontario metal mines ($449.3 million) that have not been required to post realizable financial assurances to cover closure and cleanup costs in the event of bankruptcy or abandonment.

"The Ontario taxpayer can be on the hook for cleanup costs whenever a mining company runs out of ore or goes bankrupt," said Ms. Kuyek.

"Despite the substantial increase in public expenditure on mining in Ontario, our analysis reveals that the government of Ontario is reaping diminishing retuns. Spending money on the mining industry is a poor economic investment," said Dr. Mark Winfield of the Pembina Institute, and lead author of the report.

The report recommends:

  • Stop giving new subsidies to the industry. They are bad investments of public funds that earn poor returns.
  • Withdraw tax breaks and bring mining companies' taxes into line with the general corporate tax structure.
  • Ensure mines pay appropriate mineral royalties and amounts for energy and water use.
  • Reallocate the resources given to the mining industry to remediate abandoned mines, and to devise economic strategies for mine-dependent communities.
  • Require realizable financial assurances from new and operating mines to assure proper closure and cleanup.

The increases in government tax and spending subsidies to the mining industry from 1995 to 2001 (+$24.7 million) came at the same time the operating budget of the Ontario Ministry of the Environment, charged with regulating mining's environmental impacts, was reduced (-$73 million).

"The Ontario Government has dramatically increased subsidies to the mining industry while pleading fiscal restraint and cutting back on the protection of environment. These political decisions reflected approaches more in keeping with the 19th century than the 21st," said Dr. Winfield. "The province needs to focus on making investment in forms of development that will be environmentally, socially and economically sustainable over the long term."

For further information:

Joan Kuyek, MiningWatch Canada (613) 569 3439, or cell (613) 795 5710 Mark Winfield, Pembina Institute (416) 978-5656