Mining for more: How much is mining really worth to Ontario? – by Rita Celli (CBC News Business – May 11, 2015)

For Rita Celli’s Ontario Today program on mining, click here:

Are low royalty rates making the province a tax haven for mining or building a viable industry

Ontario has collected about 1.5 per cent in royalties on the billions of dollars worth of ore extracted in the province over the past decade, but critics say that’s not enough for the loss of non-renewable resources, a CBC News investigation supported by Michener-Deacon shows.

“One and a half per cent! That’s like 10 times less than a tip at a restaurant. Can’t we require that they tip us 15 per cent for using and extracting our resources?” says Ugo Lapointe of Mining Watch Canada.

In Ontario, companies pay a mining profits tax on precious and base metals. When the company makes money, it’s supposed to pay this so-called royalty.

Critics say precious and base metals are Crown assets and that the province should get the best deal possible as compensation for the loss of non-renewable natural resources. But the mining industry and government officials argue that mining is a uniquely expensive enterprise and that focusing on royalties distorts the big picture.

Defending royalty regime

The province’s overall mining regulations are fair, says Ontario Mines Minister Michael Gravelle. He argues the province is doing well attracting new investments for exploration and the level of the mining tax is not a priority.

“Mining taxes are obviously one part of it, but the value for us are the jobs, are the indirect economic benefits that come from the jobs,” he says.

The CBC and Michener-Deacon investigation analyzed several of the benefits often cited about mining in Ontario, including jobs, and royalties.

Figures from Statistics Canada show that direct employment in the mining sector accounts for less than half a per cent of Ontario’s overall job picture, compared to 11 per cent in manufacturing.

Another comparison shows that for the last five years, the City of Toronto collected as much in annual parking fines as the province did from more than a dozen gold and nickel companies.

In 2008, with record gold prices, the province received just over $231 million in royalties, the highest payment in 12 years of examined data. In 2014, the province’s take dropped to $11 million. CBC News has learned that the province refunded money to several companies last year.

“It’s so discouraging. It’s so out of this world,” says Lapointe. “Now we learn that Ontario government paid back — gave cheques to companies? Ridiculous.”

Confusing rebate

The reasons for the refund are unclear. CBC News consulted two tax experts to review the government’s written explanation. They say the answer is confusing.

“Companies have their hands in the candy jars and they want more candies and at some point someone needs to step up and stop them and say enough!” Lapointe says.

The low rate is not disputed by the industry. Chris Hodgson, the head of the Ontario Mining Association and a former Progressive Conservative MPP who served as minister of both Northern Development and Natural Resources, says the money collected from the mining tax isn’t a make it or break it situation for Ontario’s coffers.

“It’s not a lot of money to the province,” says Hodgson. “It’s just a small number. It doesn’t register in our document because it’s so small compared to other levels of revenue … You take a look at our taxation in Ontario and it’s obviously working. Companies are investing money in Ontario and they’re not investing in other places in Canada to the same rate.”

Dennis Howlett, head of Canadians for Fair Taxation, says when corporations don’t pay their share of taxes, the burden falls to ordinary citizens.

Low rates attract mines

“Ontario has one of the lowest mining taxation rates in the world. Now that’s one of the reasons we have so many mining companies headquartered in Ontario. We’re almost like a tax haven for mining here in Canada,” Howlett says.

“Every politician I know is terrified that the companies will just take their ball and go home. In the case of the diamonds and the minerals they can’t — you cannot take our gold deposits or our diamond pipes out of the country. We can let you empty them, but you can’t take them away,” says economist David Robinson, also a professor at Sudbury’s Laurentian University.

In 2009, the auditor general in Quebec stirred a thorny debate after revealing that several companies had not paid any mining royalties in that province. In the last Ontario election, only the Green Party included raising mining taxes and royalties in its platform.

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