The Good of Mining: Revenues for Public Benefits

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It's Mining Week in the NWT!  ”The Good of Mining” is a series highlighting the important relationship that NWT residents have with the NWT’s mining sector.

The natural resources of the Northwest Territories belong to all residents.

To ensure that NWT residents benefit from resource development, the Government of the Northwest Territories collects royalties for the resources; and taxes from the mining companies that develop them.

Collectively, these revenues are invested in infrastructure, health, social services, economic development and the many government programs and services that NWT residents depend upon.

The amount of revenues collected each year varies depending on the performance of operating mines. Over the past 10 years, the GNWT has collected an average of nearly $100 million annually in revenues from diamond mines.

Revenues are collected in two primary ways from natural resource projects: taxes and royalties.

Taxes

Resource projects, such as the diamond mines, provide the GNWT with a significant portion of corporate income tax, fuel tax, and property tax revenues. Their employees pay payroll tax and personal income tax.

In the past three years, diamond mines have contributed 41 percent of the GNWT’s corporate income, fuel, property, and payroll tax revenue.

  • Corporate taxes - A percentage of money taken from profits of companies doing business in the NWT. Currently, the corporate tax rate is 11.5% of corporate taxable income.
  • Property taxes - Mines in the NWT are charged taxes for the properties they hold. The NWT has some of the highest property taxes on mines in Canada.
  • Fuel taxes – Mines sites that are continually running power generation facilities, haul trucks and processing equipment, burn a lot of fuel.  The NWT applies taxes on all fuels used for purposes other than heating.
  • Payroll taxes – Everybody who works in the NWT is charged a 2%tax on their employment incomes. (NWT residents receive a refundable Cost of Living tax credit.)

Royalties

Royalties are what we charge resource companies for the actual resources they take from the ground.

The royalty serves to convert the resource in the ground into a financial asset for the public benefit of all NWT residents.

How much royalties are collected varies based on how well mines do. Since, 2008-2009, the GNWT has collected an average of $71.26 million annually.

Calculating Royalties

Royalties are calculated on both production value and project profits. This means that hat companies pay for NWT resources is based on both the amount of money their resources generate each year, and how profitable those resources have been.

Production value can be influenced by things like market prices and the quality of resources being extracted. Profits are influenced by how much is produced at a mine, and how much the company needs to spend to produce those resources.

The higher the production and profit, the more the NWT collects in royalties.

The GNWT and federal governments split the royalties collected from resource development (50-50). The GNWT shares 25% of the royalties it receives with Indigenous governments on the Intergovernmental Council.

(Because the NWT receives transfer payments from the federal government, a limit is placed on how much the NWT can actually collect from royalties.  The limit is 5% of the NWT’s Gross Domestic Product. This cap is unlikely to be reached in the foreseeable future.)