This article was provided by the Ontario Mining Association (OMA), an organization that was established in 1920 to represent the mining industry of the province.
When assessing provincial revenues from mining, one must take into account that Ontario’s mining tax is really just the tip of the proverbial iceberg with regards to the sector’s economic contribution to the province. Mining tax is paid on top of all corporate taxes, payroll taxes, sales taxes, permitting fees and other business taxes. When added up, Ontario mining companies’ tax contributions to all levels of government are more than $1 billion annually, which pays for necessities such as roads, schools, hospitals, community centres, electrical grid access for remote communities, and other public good priorities. The value of mineral production in Ontario was $11 billion in 2014.
All jurisdictions must balance the need for capital investment to develop their mineral resources with the desire to increase revenue through higher taxation. There are many models for meeting this challenge – in Ontario, we don’t risk the taxpayer funding up front by paying for infrastructure and offering competitive hydro rates. Instead, we require mining companies to take on the risk, and subsequently offer tax breaks when the project is up and running, employing and spending.
Benchmarking the cost to mine in Ontario, therefore, requires “apples to apples” comparisons. Jurisdictions with higher mining tax rates have lower electricity prices and government cost-sharing on infrastructure. A recent report indicates that exploration and mining costs are particularly inflated in the North, where companies need to invest in lacking, but essential infrastructure such as ports, power plants, winter and permanent roads, and accommodation facilities.
In Ontario as a whole, the sector employs about 27,500 people directly, and another 50,000 indirectly in the fabrication and processing of minerals, according to a 2012 University of Toronto study on the economics of mining. These are safe, high-tech and well-paying careers. Indeed, the average weekly wage paid in the mining sector is 60% higher than Ontario’s average industrial wage, and wages paid in mining supply and services are almost 95% higher. Annual industry payroll is in excess of $1.7 billion, with more than half a billion dollars annually in personal income tax.
Because almost 90% of the input costs of mining operations in the province are sourced from within Canada, with most of those being local, and 60% of its output is exported, the mining sector is a natural multiplier of jobs. According to government statistics, 256,000 people are employed in Ontario’s mineral cluster. As the largest private sector employer of Aboriginals in Canada, mining makes a significant contribution to the wellbeing and development of remote communities.
Taking a different perspective, a recent University of Toronto study shows that the benefits from opening just one new gold mine include more than $102 million in tax revenue for all levels of government annually, as well as the creation of a large number of highly skilled, high paying jobs, enhancements to Ontario’s GDP, gains in the province’s trade balance, support for infrastructure development, and more opportunities for Aboriginal Canadians. In other words, every mine counts, and Ontarians benefit each time a new mine is brought into production.
Sustaining and growing the benefits that mining brings is clearly in the interest of current and future generations. However, competitiveness and leadership no longer hinge on good geology. Mining investment is highly mobile and competition is fierce among jurisdictions. To take advantage of our vast potential, we need clarity of rules and an attractive business environment, supported by integrated, innovative and farsighted government policy. In that regard, the government’s focus on jobs and encouraging investment is best served through tax rate stability. This deliberate strategy has served to garner Ontario a larger market share of mining investment. Now is the time to stay the course on tax policy and actively bring more mines into production.