CBC –  Low royalty rates, lax oversight mean N.W.T.’s missing out on mining revenues: report.

‘The N.W.T. lags behind other Canadian jurisdictions in exploration investment.’

The Northwest Territories is essentially giving away its mineral resources for little financial return compared to some other jurisdictions in the world, according to a recent report released by the Department of Industry, Tourism and Investment.

The N.W.T. has what the Northwest Territories Mineral Sector Review and Benchmarking report describes as one of the most “charitable fiscal regimes” in the world for mining companies. The independent report, paid for by the territorial government, estimates mining companies here pay an effective tax rate of –  at most – between 20 and 30 per cent, similar to the rest of Canada.

The effective tax rate is defined as revenue paid to government from royalties and taxes combined. In South Africa, the take is 30 to 35 per cent, while in Western Australia it can reach as high as 80 per cent. The government of the N.W.T. collected approximately $83 million in royalties and tax revenue from mining operations in 2016, or less than five per cent of the territory’s 2017 $1.86 billion budget.

According to the report, mining giant Rio Tinto paid zero royalties to the territorial government from its Diavik diamond mine operation in 2015, and half of the $63.2 million in income taxes it did pay appear to have been kept by the federal government.

The territory, according to the report, does not determine royalties based on a mining company’s profits but based on a complicated formula that determines royalties owed based on the value of mineral production after costs, something easily manipulated to minimize the amount owed in royalties. This is typical for Canada, the report says, but unusual for the rest of the world.

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