We’re holding an olympic blog series these couple of weeks focussing on gold, silver and copper mining in resource rich countries as well as on gold, silver and copper mining companies.
Following Team GB's gold rush, PWYP International's Joseph Williams has blogged about Anglo-Australian company Rio Tinto, and their foray into transparency.
Since Team GB and Australia have now both won gold medals at the Olympics, it seems like the right time to ask where British-Australian mining giant Rio Tinto ranks on financial transparency.
Although the London 2012 Olympics sponsor has been criticised for issues ranging from labour relations to human rights to its environmental record, it does lead the pack on the amount of financial information it puts into the public domain in terms of taxes paid to different governments around the world.
It is common practice for large multinational companies to provide one aggregated global amount for the taxes they pay worldwide. Another Olympic sponsor, oil giant BP, states in its most recent sustainability report to have paid income and production taxes of $16.339 billion in 2011 but does not break that figure down for the eighty-odd countries where it has operations. This information is useless if you are an investor or member of the public wanting to know what was paid in one particular country for one particular project.
Rio Tinto’s Taxes Paid in 2011 report lists the payments it makes for each of the main countries where it has operations (including countries such as Switzerland where it does not actually mine but nevertheless pays taxes). The report also gives some detail on the different types of payments made and discloses the taxes and profits for a few of its business units (some of which equate to companies built around specific mines).
While Rio Tinto’s report goes further than its competitors in the oil and gas industry and would probably win gold, there is room for improvement and we are far from any world records being broken. Fortunately, like any determined athlete, the company’s Chief Financial Officer Guy Elliott has stated that “we are committed to maintaining and improving our reporting and transparency”.
The first thing Rio Tinto could do is provide comprehensive project-by-project payment disclosure which would enable communities to track their entitlements and demand accountability for the revenues received for the exploitation of specific projects in their own backyard.
We learn in Rio Tinto’s report that it paid the Guinean government $753m last year but it would be very useful to know that this included one huge project-specific payment of $700m for its Simandou iron ore project. In any case, the US Dodd-Frank Act of July 2010 which requires project-by-project reporting and will soon be implemented, together with proposed European legislation which also includes a similar requirement will ensure Rio Tinto reports such information in the future.
The second thing Rio Tinto could do is help citizens to understand more about why such payments are being made. This means improving disclosure over the contracts they sign to exploit metals like gold and copper and also to make public other types of information such as profits, sales, and production volumes for each country of operation which would guard against profit shifting.
With all the talk these days at the Olympics of doping and match-fixing, it is essential that everything can be done to create a level playing field for the most talented and hard-working athletes to shine. Transparency is what can bring a level playing field to the extractive industry, and guard against success through corruption or opaque deals struck behind closed doors.
It is for this reason that Rio Tonto’s resistance to mandatory rules on transparency is so unfortunate (CFO Guy Elliott stated in their Taxes paid in 2011 report “we do not believe mandatory rules for disclosure of payments to governments is necessary”). The best way to level the playing field on transparency is to ensure strong regulation worldwide which is what the PWYP campaign will continue to push for.