Canada is one of the biggest extractive sector players in the world. We are home to approximately 60% of the world’s mining companies, and the Toronto Stock Exchange and Venture Exchange host more oil and gas companies than any other exchange in the world. Collectively, these companies have interests in over 100 countries.
Whether through taxes, royalties, bonuses or fees, extractive companies make significant payments to resource-rich countries and communities around the world for their natural resources. Until recently, these numbers were shrouded in secrecy. Citizens had no way of knowing how much money their governments were making from their natural resources or how those revenues were being spent. This opacity has fuelled corruption and mismanagement in many resource-rich countries and stifled informed dialogue about how natural resources should be managed.
Recognizing the benefit of increased transparency, PWYP-Canada (Publish What You Pay Canada), with the Natural Resource Governance Institute, the Mining Association of Canada and the Prospectors and Developers Association of Canada, launched the Resource Revenue Transparency Working Group. Together these organizations promoted mandatory disclosure requirements for Canadian mining companies operating in Canada and around the world.
In 2014, responding to the working group’s campaign, the federal government passed the Extractive Sector Transparency Measures Act (ESTMA). Canadian extractive companies are now required to publish their payments per project in countries where they operate. The act requires large private oil, gas and mining companies, along with those listed on a Canadian stock exchange, to disclose the payments they make to governments in Canada and abroad on a country-by-country and project-by-project basis.
Many were surprised to see the Canadian mining industry supporting these requirements and sometimes actively pushing for them. But there are clear benefits to the industry from transparency, including the opportunity to demonstrate leadership on a global scale. As highlighted by the Mining Association of Canada on its website, “[t]he enhanced transparency resulting from this legislation will help reduce instances of corruption by enabling citizens around the world to hold their governments accountable for how they allocate and spend mining revenues. It will also help to ensure that these revenues contribute to sustainable development and poverty reduction.”
For many companies, enhanced transparency is good for business. It can promote a more stable investment climate and help secure a social licence to operate. During debate on ESTMA, investors in the mining sector expressed the desire to see companies disclosing what they pay to governments in order to assess project- and country-specific reputational and tax risks. As the use of tax havens continues to receive more and more attention, investors are paying closer attention to such information.
One of the key things that PWYP-Canada heard from many extractive companies during the transparency working group campaign was that people, communities, and sometimes even governments often believe a company has paid significantly less or more in taxes and other payments then is the case. Some companies had been wrongly accused of paying no taxes at all.
While companies can voluntarily disclose this information—and some did prior to the passing of ESTMA—the fact the company is legally required to do so provides a much stronger level of credibility to this data. Furthermore, legal transparency requirements level the playing field while providing a full and clear picture of the industry to citizens and communities interested in what companies in their region are paying governments at various levels (local, regional, national).
The question of how much a company should pay in taxes and other payments is an important one, as is the question of whether to extract natural resources at all. There are a variety of social, environmental and economic considerations that need to be made, including how much money governments will earn from the project. Without this information, it is almost impossible to have a meaningful and informed conversation about whether what is being paid (or will be paid) is fair.
There have been numerous debates in Canada over the taxation regime, federally and in the provinces and territories, for oil, gas and mining companies. These debates often take place in the absence of tangible data on how much money such projects contribute to the public purse. It’s time for a more data-driven conversation about the value of mining and extracting natural resources. The transparency requirements in ESTMA take us a step in the right direction.
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Kady Seguin is the Technical Director at IMPACT and previously led the campaign for ESTMA legislation as the Interim Director at PWYP-Canada. Emily Nickerson is the Director of PWYP-Canada and leads efforts in Canada to make oil, gas and mineral governance open, accountable, sustainable, equitable and responsive to all people. Data on payments to national and foreign governments from extractive entities active in Canada can be found on the Natural Resources Canada website. For global information, including data from Canada and countries with similar legislation, see www.resourceproject.org.