MiningWatch Canada Welcomes Drummond Commission’s Recommendation to Examine Mining Taxes

(Ottawa) For over a decade, MiningWatch Canada has been saying that Ontarians should be getting a better share of the resource wealth that is extracted in the province. The coalition of social justice, environmental and Indigenous groups welcomed the recommendation to eliminate a key tax break for mining companies and to review the mining tax system in the recently released report from the Commission on the Reform of Ontario’s Public Services, chaired by Donald Drummond.

The report recommends that the province “eliminate the Ontario resource tax credit and review the mining tax system to ensure that the province is supporting the exploration and production of minerals in Ontario while receiving a fair return on its natural resources.”

“Given the province’s economic situation and the current growth in the mining sector, this is an important recommendation that the government should definitely implement in this year’s budget,” urged Ramsey Hart, Canada Program Coordinator at MiningWatch Canada.

Removing the resource tax credit is a good first step and any review of the Mining Tax will inevitably conclude that Ontario is not currently getting a fair return. MiningWatch’s analysis shows that relative to other Canadian jurisdictions with significant mining activity, Ontario is in a class by itself – at the bottom. Low tax rates and tax breaks mean that the province is missing out on hundreds of millions of dollars of potential revenues.

The resource tax credit targeted by Drummond reduces the provincial corporate taxes that mining companies pay to 8.25% of their profits, the lowest rate in Canada.[i]

In order to compensate Ontarians for the extraction of publicly owned mineral resources, companies must also pay mining tax, or in the case of the Victor diamond mine, the provincial diamond royalty. Again, compared with other jurisdictions, Ontario does not do well. The Ontario mining tax rate is low at 10%, and only 5% of profits for remote mines and mines may be exempt for five or ten years before paying. The diamond royalty ranges from 5% to 14% depending on the profit level.

In 2010 the amount retained from $5.58-billion in minerals covered by the mining tax and diamond royalty was only $82-million, or less than 1.5%. Other provinces retained much more of the value of mineral production; 9% in Saskatchewan and 5% in B.C.[ii] MiningWatch is continuing analysis of mining taxation and will be releasing a more detailed report early next month.

The Drummond Report’s recommendation on mining taxes has also received support from the United Steelworkers, Canada’s largest mining union.[iii]

Thanks to rising mineral prices, the mining industry has quickly recovered from the recession of 2008. A Price Waterhouse Cooper report on the sector indicated that in 2010 the world’s top 40 mining companies saw their profit levels increase 156% from 2009.[iv] Five of these companies have operations in Ontario. The sector is also poised for significant expansion in the years ahead and Ontario needs to reform its tax system before major projects like those proposed for the so-called Ring of Fire go into production.

MiningWatch also welcomes the call for regulatory systems to be self-financing and for greater collaboration on developments in the Ring of Fire. The call for further streamlining of environmental assessment is, however, of concern given that in Ontario provincial environmental assessments of mines is already voluntary. The overall emphasis on sweeping cuts to public services is also of grave concern.

Ramsey Hart, Co-Manager, Canada Program, MiningWatch Canada
tel. (613) 569-3439 (ofc) or (613) 298-4745 (cell) ramsey(at)miningwatch.ca

[i] Natural Resources Canada
[ii] Data taken from Natural Resources Canada Annual Mining Statistics
and a 2011 Entrans report for the Mining Association of Canada
[iii] USW Press Release and presentation by Wayne Fraser to the Commission on Quality Public Services and Tax Fairness
[iv] Mine 2011, The Game Has Changed