The vast sums of wealth created by the extraction and export of
natural resources can spur growth and transform economies. However,
all too often, the potentially transformative revenue streams
derived from the resource sector are lost to corruption or
mismanagement, a problem that is particularly acute in developing
countries. As a result, "The Resource Revenue Transparency
Working Group", comprised of mining industry groups (including
the PDAC and Mining Association of Canada) and organizations
focussed on good governance practices (including Publish What You
Pay Canada and the Revenue Watch Institute), has recommended the
creation of a new mandatory disclosure regime for payments made by
Canadian mining companies to foreign governments.
Canada is home to almost 60% of the world's mining companies
and 75% of all public mine financings, and for that reason it is
well-positioned to impact the manner in which international mining
revenues are disclosed through domestic regulation. The proposed
framework is modelled after similar regimes already in place in the
United States and Europe. What's more, there are already over
100 Canadian companies listed on U.S. stock exchanges that are
subject to new disclosure requirements mandated by section 1504 of
the Dodd-Frank Wall Street Reform and Consumer Protection
The scope of the proposed disclosure regime would be
far-reaching, applying to all publicly traded Canadian mining
companies engaged in the commercial development of minerals.
Furthermore, the framework would catch all subsidiaries, joint
ventures and others entities over which mining companies hold
significant influence or control. Likewise, it would seek to
account for all payments meeting a minimum dollar value threshold
made at all stages of the typical industry "Project Life
Cycle" and "Value Chain", as illustrated below:
This means that payments ranging from those for securing
permits, to those for property taxes, to those covering remediation
work would need to be reported. In casting a wide net the working
group hopes to achieve maximum transparency and, in turn, increase
the overall effectiveness of the system. The types and nature of
payments that would require disclosure, can be seen in the list
Profit Taxes (including profit, income and production
Royalties (including royalties-in-kind)
Fees (including license fees, rental fees and concession
Production entitlements (by value and volume)
Bonuses (including signature, discovery and production
Dividends (i.e. withholding tax)
Infrastructure payments as required by law or contract (e.g.,
building a road or railway)
Transportation and terminal operations fees
All payments falling within the categories listed above will
have to be disclosed, although this list is by no means exhaustive.
Disclosure will be made on a disaggregated cash basis by company on
a project-level basis, meaning each miner would need to report all
payments made in respect of each of its individual projects. The
reporting would also include totals for each payment category,
currency specification, timing of payments and identification of
the recipient government. However, as previously mentioned, only
individual payments meeting specified dollar value thresholds would
need to be reported. The working group proposes that the threshold
for TSX-listed companies be $100,000 and $10,000 for TSX Venture
Given the provincial securities regulators' expertise in
managing public company disclosure filings, it is suggested that
they administer this proposed system. Like all securities
regulation, the importance of harmonization amongst provincial
regimes is also stressed. Given the absence of a national
securities regulator, it is anticipated that the Canadian
Securities Administrators' would take the lead in working with
the provincial regulators to enact a uniform national
Disclosure would be required annually and would be posted to
SEDAR, with penalties accruing to issuers who fail to file or file
inaccurate information coming under the purview of the relevant
provincial securities legislation.
The working group's proposed framework is an ambitious
proposal that undoubtedly requires further scrutiny and stakeholder
input. However, its objectives are genuine and if implemented and
enforced adeptly it would increase transparency in the mining
industry and ensure the wealth it creates is properly accounted
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
While most are well aware that the sale of a business is generally a complex process, even sophisticated business owners are surprised by just how much cost and effort is required to complete the sale.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).