Why is Canada the global mining powerhouse?

Internationally-focused mining companies set up shop in Canada because the financial and technological infrastructure is present and, in the words of author Alain Deneault, Canada is the “most attractive tax and regulatory haven for the world extractive industry.”

Disclosure requirements on the Toronto and Vancouver stock exchanges are relatively lax. Firms must only report operational information of interest to a “reasonable investor”. A publicly listed firm is not required to disclose operational developments causing social harm if they are unlikely to impact the company’s bottom line. The Mining Association of Canada boasted that TSX rules were “designed around the needs of the mining industry.”

While stock exchange regulators are largely indifferent to the broader consequences of corporate behaviour, so are Canadian politicians and the legal system. A boon to an industry highly dependent on public officials, Ottawa has long been permissive towards corruption by Canadian nationals abroad, including the natural resource sector.

For instance, it is extremely difficult to pursue a Canadian company in domestic court for committing human rights violations abroad. Canada does not have a law like the US’ Alien Tort Act, which allows criminal or civil suits against Canadian companies responsible for environmental and/or human rights violations abroad. Moreover, Canada does not withhold diplomatic and financial support from companies responsible for major abuses abroad. 

Canadian tax policy is also mining friendly. According to Deneault, Canada is “the tax haven of choice for the extractive sector.” Ottawa has signed nearly 100 bilateral tax treaties and 30 Tax Information Exchange Agreements with other countries. These agreements generally allow internationally-focused companies to return profits to Canada without paying tax here.

The tax code specifically privileges the ecologically damaging extractive sector in a variety of ways. The “Canadian exploration expense” and “Canadian development expense” allow miners to write off expenses and the tax code provides avenues for resource corporations to sidestep Canadian tax if their extractive operations are outside the country. Flow-through shares encourage stock purchases in high risk resource exploration companies. With a flow-through share, individuals can personally deduct part of a company’s expenses, which it cannot claim because it has already deducted all its income. Investors can receive the benefits of some flow-through shares even when the company is entirely foreign-focused. Thus, Deneault writes that investing in a Canadian “mining company is tax-free just as a charity donation.”