Australian miners singled out in a recent report by not-for-profit group Oxfam have expressed their disappointment in the allegations made in the report.

In its recently released ‘Tax Justice Network Tax Extractives’ report, Oxfam alleges that as much as $1.1- billion in profits was moved out of Africa in 2015 alone by Australian miners operating on the continent through the use of tax secrecy jurisdictions.

The report noted that Australian miners could be responsible for the loss of an estimated $289-million in government tax revenues.

Pointing in particular to the operations of gold miner Perseus Mining, mineral sands miner Iluka Resources and base metals miner MMG, Oxfam claimed that its investigation indicated that the miners had financial and corporate arrangements in place that could have led to significantly less tax than “the public should expect”.

Oxfam’s internal estimations found that the three mines could have paid $149-million more in corporate income tax over a period of five to seven years across the three operating regions of Ghana, the Democratic Republic of Congo (DRC) and Sierra Leone.

“A lack of transparency means it is not entirely possible to know if this money was not paid because of aggressive tax practices or due to legitimate deductions on mine costs. “However, we do understand that these mines are privy to special or secretive tax arrangements and that each company has subsidiaries located in tax havens, which raises serious questions about their tax practices,” the report read.

“All three Australian companies provide no public financial details of their subsidiaries in tax secrecy jurisdictions (tax havens). And all the company financial reports show consolidated, total tax payments rather than reporting in which countries taxes were actually paid around the world. Since each mine began operating, they all appear to have exploited some form of tax concession or loophole.”

The report claimed that, despite “huge” revenues for each of the three Australian miners, the governments of Ghana, Sierra Leone and the DRC had received between 0% and 0.9% of the revenues in corporate income tax on average between 2009 and 2015, and that the corporate tax rates in these countries were at 30%.

Perseus Mining, which produces gold from the Edikan mine, in Ghana, has refuted the claims, with CEO Jeff Quartermaine noting that there were ‘numerous’ references made to the company in the report that were simply wrong.

“Perseus pays all taxes that are legislated as and when they fall due,” he told Mining Weekly.

“Perseus Mining’s annual report clearly sets out the company’s financial status. This report is audited each year by PwC, and previously by E&Y.

He noted that the company paid royalties amounting to 5% to the government of Ghana, and had done so since the first gold was produced at Edikan, in 2011.

In 2018 alone, this royalty amounted to $19-million.

Iluka, which operates the Sierra Rutile operation, in Sierra Leone, told Mining Weekly that the report contained numerous errors of fact and misleading conclusions.

CFO Adele Stratton pointed out that the Oxfam report focused predominantly on company income tax, which was only one of a number of taxes paid by the company, which also included royalties, levies and duties and employee personal income tax remittances.

“Focusing solely on corporate income tax significantly underrepresents a company’s overall economic contributions and is misleading to readers.

“For example, Oxfam has cited that Iluka reported that Sierra Rutile paid taxes of $4.2-million in 2017, representing 3.6% of revenues. What Oxfam has reported was company income tax only, notwithstanding that Iluka had informed Oxfam that total taxes paid in 2017 were in fact $21-million, representing 20% of revenue.

“Taxes paid are split between direct taxes borne by Sierra Rutile, being corporate income tax, royalties, mining licence and surface rents and import duties and taxes collected, represented by employee pay-as-you-earn remittances and withholding taxes,” Stratton said.

Stratton pointed out that, since its acquisition of the Sierra Rutile project in December 2016, the company had paid a total of $50-million in taxes, while its total tax and remittances to government amounted to nearly $55-million.

Sierra Rutile is the largest employer in Sierra Leone, with a workforce of more than 2 500 people, 98% of which are locals, according to Stratton. In 2018 alone, the operation paid $59-million to local suppliers.

Further, Stratton noted that Iluka was a great supporter of tax transparency and was one of the first signatories to the Australian Board of Tax’s voluntary tax transparency code, publishing its first tax transparency report in the 2016 income year.

Base metals miner MMG, which owns the Kinsevere copper project, in the DRC, has also expressed disappointment in the report.Executive GM for stakeholder relations Troy Hey said that, while the issues covered in the report were important, the report failed to adhere to internationally accepted accounting standards.

“MMG values the reports produced by Oxfam; however, we were disappointed to see that, despite constructively engaging with Oxfam Australia and providing many opportunities for clarification, the report continues to contain material errors and omissions. Despite numerous opportunities, these were not corrected prior to publication.

“As a result, the report implies that MMG is not paying its fair share of tax and is not acting as a good corporate citizen,” Hey said.

“MMG is a major investor, taxpayer, employer and purchaser of local goods and services. “We are one of the largest investors in the DRC and proud of our significant economic and social contributions. We aim for the highest standards of corporate governance, including on tax. “Our approach to date has been to transparently disclose tax and royalty payments, as well as broader social contributions annually.”

MMG’s 2018 sustainability report showed that the company contributed a total of $56.2-million in taxes in the DRC in 2018 alone, and a further $44-million in 2017. Hey said that the company’s audited annual report found that its effective tax rate was between 55% and 53% for the 2018 and 2017 financial years.

“The report contains several statements made by Oxfam Australia which relate to MMG’s tax and royalties disclosures and suggest that MMG may be seeking to mislead or engage in deceptive conduct.

“We reject any assertion that we have misreported the amount of royalties paid. The company’s annual reports and accounts are audited by Deloitte and, in earlier financial years, by PwC, both internationally reputable accounting and audit firms.

“MMG’s payment of royalties has been clearly disclosed in our annual report for each of the years analysed by Oxfam for their report,” Hey said.

He noted that the report also failed to consider the direct investment of $931 163 that MMG made into social development initiatives in 2018 to increase the development outcomes for its host communities, which was aligned with the United Nations’ Sustainable Development Goals, and focused on four pillars: essentials for life, health and wellbeing, securing incomes, and education.

The Australia-Africa Minerals and Energy Group has also has raised issues with the report, with CEO Bill Witham saying that the report made its conclusions based on the basic premise of assessing the amount of company tax that should be paid as a percentage of gross revenue.

“The report does not give consideration to the taxable income of the relevant companies, despite this being the basis for paying income tax in almost all jurisdictions around the world. As a result of this basic premise, investment in capital and operating costs that are incurred upfront and often for substantial periods prior to the generation of any revenue by the company are ignored.