Towards transparency: How to make the extractive industries pay their fair share of tax

By Lucy Manne, Head of Policy and Campaigns, ActionAid Australia


“Nigeria is losing billions to tax avoidance and tax evasion and we’re losing a lot of money that could have been used to provide health facilities, education and safer streets for women like me.” – Adejokun, student, Nigeria

The provision of gender-responsive public services like healthcare, education and public transport are a critical part of achieving gender equality. Public services both allow women’s basic needs to be met, and redistribute women’s unpaid labour. Without public healthcare, for example, it’s often women who take on caring work for those who are sick, and this in turn prevents women from accessing education and decent work.

In low income countries, one of the main barriers to providing these public services is corporate tax dodging, and mining companies are often the culprits. The Organisation for Economic Co-operation and Development (OECD) has identified the extractive industries as the world’s most corrupt economic sector. The sector is also associated with tax minimisation and avoidance practices. The UN Economic Commission for Africa’s High Level Panel on Illicit Financial Flows identified the extractive industries as the sector with the highest concentration of illicit financial flows out of Africa.

Around the world, flashpoints such as the release of the Panama Papers has led to stronger policies to combat this kind of tax avoidance. One of the main policies that is often introduced to address tax dodging and corruption within the extractives sector is called “mandatory disclosure.”

Mandatory disclosure policies require mining companies to publish their payments to government (including taxes and royalties) for all the projects and countries where they operate. This is a powerful tool that both encourages these companies to do the right thing, and also brings transparency to companies that are finding ways of avoiding paying their fair share. Currently EU countries and Canada are covered by mandatory disclosure laws, but Australia, despite leading the way on other measures to address tax avoidance, has so far been slow to follow suit.

ActionAid Australia, together with with an alliance of civil society organisations under the Publish What You Pay Coalition, have long been campaigning for the introduction of mandatory disclosure laws in Australia. And in 2017, we had a major victory: the ALP announced that they would bring in a mandatory disclosure policy if elected.

But what exactly would this policy mean in practice? How many companies would be covered, and which countries will benefit? How does it compare to the mandatory disclosure policies that have been introduced in other countries?

The devil is in the detail with this kind of policy, and so in 2018 ActionAid Australia joined with Publish What You Pay Australia to attempt to answer these questions through our recently released joint report, Towards Transparency of the Extractive Industries.

In brief, we found that this policy would see 67 mining companies reporting on their payments at a project level, and for 61 of these companies this would be the first time they have reported with this level of detail. This is likely to have a major impact in low income countries, and particularly on the African continent, where it would result in 18 countries having this level of detailed disclosure for the first time.

The ALP policy, however, is narrower in its scope than the EU and Canadian laws. Our report also found that if the policy was strengthened in line with the EU and Canadian laws, this number would increase to 109. Given the benefits and the global precedent, this seems like a no brainer – and it’s something that ActionAid will continue to call for. And it’s also essential that this commitment is made by all parties.

Read our full analysis.