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Australia: $1.1 billion in profit may have been shifted out of Africa by Australian miners using tax avoidance strategies

A new report from Oxfam and the Tax Justice Network estimates that $289 million in tax revenue was ripped out of developing countries in Africa in one year by mining companies exploiting tax concessions or loopholes. The report does not accuse any companies of illegal activity, but calls on mining companies to pay their “fair share” of tax by aligning payments with actual economic activity. The report found that there is little transparency about the tax affairs of mining companies. The three Australian companies reported on in detail were Perseus Mining, MMG and Iluka Resources.

Buried Treasure

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4 August 2019

Australian miners' tax affairs 'shrouded in secrecy', with claims Africa may have lost $1.1b

Author: Nassim Khadem, ABC

30 July 2019

An estimated $1.1 billion in profit may have been shifted out of Africa by Australian miners in one year, according to a new report by Oxfam and the Tax Justice Network..

…The report also drills down into the mining operations owned by three Australian companies: Perseus Mining, MMG and Iluka Resources.

…But Perseus Mining managing director and CEO Jeff Quartermaine said the report had made "a series of unfounded allegations about Perseus's activities in Ghana that are false and misleading".

"The statement that 'the mine could have paid at least $57 million in income tax from 2012 to 2017' is false."

He added that the company was obliged to pay a royalty amounting to 5 per cent of revenue to the Ghanaian Government and had done so, since the first gold was mined in 2011.

"In 2018 alone, this amounted to US$19 million," he said.

…The report also claimed that MMG paid almost no tax in the Democratic Republic of Congo….

…In its right of response to Oxfam, the company noted that "MMG Ltd engages the Appleby law firm, and its affiliate, Estera for advice on legal and corporate secretarial matters".

MMG also stated it was "simplistic to apply an industry average profit margin to revenue, as there are different factors impacting the financial performance of a mine".

The report suggests Iluka's Sierra Rutile mine in Sierra Leone — which Iluka Resources acquired in 2016 — paid on average only 0.4 per cent of total revenues in tax between 2009 and 2015, largely due to tax concessions that the previous owners got.

…Iluka's chief financial officer, Adele Stratton, said: "Oxfam's report misrepresents Sierra Rutile's company income tax payments as its total tax payments to government.

"[The report is] providing an inaccurate and potentially misleading representation of Sierra Rutile's economic contribution in Sierra Leone."

…Ms Stratton said significant carried-forward tax losses were common for mining companies given the significant upfront capital outlay required for a mining operation.

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4 August 2019

Buried Treasure: The Wealth Australian Mining Companies Hide Around the World

Author: Oxfam Australia, Uniting Church in Australia, & Tax Justice Network Australia

July 2019

In this report, we estimate that as much as $1.1 billion in profits was shifted out of Africa in 2015 alone5 by the Australian mining sector through the use of tax secrecy jurisdictions. This means Australian mining companies may be responsible for the loss of an estimated $289 million in government tax revenues in some of the poorest countries in the world (many of which are in Africa) in one single year alone. This tax could have been used for schools, hospitals and other vital services.

…Oxfam, the Uniting Church in Australia and TJN-Australia analysed in detail three mines owned by Australianheadquartered companies and listed on the Australian Stock Exchange (ASX) — Perseus Mining, Iluka Resources and MMG Ltd — and found several red flags. Our investigation indicates these mines have financial and corporate arrangements that may have led them to pay significantly less tax than the public should expect. While Iluka Resources has more recently purchased the mine in our study and now has a chance to turn things around, MMG Ltd and Perseus Mining have been in full control of their mines for the period of our examination.

• Edikan Gold Mine in Ghana (owned by Perseus Mining) does not appear to have paid a single cent in tax in Ghana since the mine began operations in 2011.

• Kinsevere mine in the DRC (a copper mine owned by MMG Ltd) paid on average 0.9% of total revenues in tax in the DRC from 2011 to 2015 (and has been operating since 2006).

• Sierra Rutile mine in Sierra Leone (extracting rutile, and acquired by Iluka Resources in 2016) has paid on average 0.4% of total revenues in tax in Sierra Leone since 2009 (this mine has been operating since early 1990s).

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