SOMO hosted a seminar on mining and tax avoidance at the ‘EU Raw Materials Policies and Resource Justice’ conference in Bucharest in September. Organized by Powershift and Mining Watch Romania, the conference focused the European Union’s resource strategy and the subsequent impacts in mining regions in Europe as well as the Global South.
The participants included EU decision makers, journalists, political party- and union representatives, and NGOs focused on mining, human rights, and the environment. Discussion subjects included the ‘European Raw Materials Initiative’, conflict minerals regulation, tax avoidance practices and the investor-to-state-dispute settlement.
Creating leverage for NGOs
SOMO’s workshop ‘Tax Avoidance Practices and How to Regulate,’ helped NGOs working on human rights and environmental issues understand the importance of revealing corporate tax avoidance in the mining sector, particularly how mining companies use profit shifting to avoid paying tax in the countries where they mine.
Governments and mining companies often justify pursuing large-scale mining projects by arguing that these developments are necessary to create jobs and to generate public revenue to help pay for schools, infrastructure, and hospitals.
The reality of profit shifting—which means that profits generated in a country with a high tax jurisdiction are intentionally shifted by the company to a country with a low, or no, tax jurisdiction—in practice undermines the public coffers in the countries where the profit is generated, in this case profit generated from the mines. When the profits are artificially lowered in the country where the profit is generated, the multinational company pays less tax in that country than reflects the real profit, hence less public revenue to pay for schools, infrastructure and hospitals.
The workshop discussed the importance and relevance of researching tax avoidance in the mining sector and gave insight into different places where useful company information can be found. The seminar also demonstrated that by using evidence of profit shifting and tax avoidance, which can demonstrate that public revenue is not justifiably increased through the large-scale mine, campaigners can create strong cases against the practices of multinational mining companies.
Case Study ‘Eldorado Gold’
In March 2015, SOMO published a report that revealed the Canadian mining company Eldorado Gold uses mailbox companies in the Netherlands to avoid paying taxes in Greece. The seminar used Eldorado Gold as a case study with participants forming small groups to work together to try to analyze Eldorado Gold’s annual reports to look for signs of tax avoidance.
Holding mining companies accountable
Organizations present at the SOMO seminar included Christliche Initiative Romero, London Mining Network and Action Aid, among others. At the end of the workshop SOMO received enthusiast feedback from the participants.
“With regard to the mining industry, taxes are always an issue. A company never pays too much of them. Mining companies put a lot of energy into tax avoidance and tax evasion. The workshop by SOMO helped NGOs working on environmental and social issues of the mining industry to understand how the industry lowers its tax payments. The workshop empowers activists to do a basic research on this issue and will help to hold mining companies accountable.” Michael Reckordt, Powershift e.V.
Companies may have great policies and intentions on paper, but what can you do to put a stop to their unsustainable or unethical business practices? SOMO trainings can give NGOs the skills to research and influence companies. SOMO Services also offers research into companies and expert advice. For more information contact [email protected].