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Next Ontario budget should hike mining royalty rates
Ramsey Hart is the Canada program co-ordinator at MiningWatch Canada. John Jacobs is a research associate with the Canadian Centre for Policy Alternatives and a PhD candidate in Carleton University’s School of Public Policy and Administration.
Ontario’s finance minister has been holding consultations to develop a “fair budget” that addresses the province’s financial difficulties. One key revenue raising measure to improve the province’s bottom line would be to ensure that the mining industry pays its fair share for the extraction of the province’s non-renewable resources.
As it stands, booming times for the mining sector have not translated into proportional benefits for the province. One of the industry’s main economic benefits — employment — is on the decline. Twenty years ago the mining industry employed 20,000 workers, but by 2012, in the midst of an ongoing mining boom the number of jobs declined to 15,000, reflecting the increasingly automated and capital intensive nature of mining operations.
Nor have provincial coffers reaped full benefits from the mining boom. Over the past decade the province has reduced taxation of the industry to the point where Ontario now has the lowest effective royalty rate (royalties as a portion of production values) of Canada’s mining provinces. Ontario’s mining royalty rates were halved over the past decade, from 20 per cent of mining profits to 10 per cent — and 5 per cent for remote mines.
As a result, in 2010 and 2011 the province’s mining industry extracted metals and minerals valued at $17 billion but only paid 1.4 per cent ($250 million) to the people of Ontario for these resources. The average Canadian rate for the same period was 5.6 per cent. Had Ontario taxed mineral extraction at the average rate in Canada the province would have generated an additional $700 million over the past two years.
The boom in commodity prices coincided with reductions in provincial and federal corporate taxes that were added to existing corporate tax breaks for the mining sector. This has contributed to record profits for the industry, but a reduction in the government’s ability to fully benefit from high commodity prices for its resources.
Ontarians are still waiting for the results of last year’s budget commitment “to ensure Ontario receives fair compensation for its non-renewable resources.”
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