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Mining taxes

Rio Tinto’s tax schemes lead to nearly $700 million tax revenue losses for Canada and Mongolia

Publication

Vincent Kiezebrink

Rhodante Ahlers

Sukhgerel Dugersuren

31 January 2018

The publication “Mining taxes” explains how the mining giant Rio Tinto, and its Canadian subsidiary Turquoise Hill Resources, avoided nearly $470 million in Canadian taxes by using mailbox companies in two tax havens, Luxembourg and the Netherlands. The publication also shows how an abusive investment agreement covering the Oyu Tolgoi copper and gold mine has resulted in a $230 million tax revenue loss for Mongolia.

This mailbox subsidiary enjoyed a very low average effective tax rate of 4.19% over the past years, likely due to a beneficial tax ruling with Luxembourg’s tax authorities. As a result of this tax scheme, Rio Tinto’s subsidiary Movele has paid US$89 million in taxes in Luxembourg, which is US$470 million less than what would have been paid in Canada, if no tax avoidance scheme had been employed. The company reports that this arrangement was approved by Canadian authorities.

In addition, Rio Tinto and the other corporate investors behind Oyu Tolgoi achieved far-reaching concessions from the Mongolian government which severely limit the tax revenues Mongolia can hope to receive from the mine. Under pressure, the government of Mongolia facilitated Rio Tinto’s use of benefits enshrined in tax treaties with Luxembourg and the Netherlands;tax treaties which Mongolia unilaterally rescinded in 2013 due to concerns that they facilitated tax avoidance. Rio Tinto was able to negotiate an even lower tax rate in 2015, after a dispute over the distribution of Oyu Tolgoi’s revenues. As a result, the Mongolian government has missed out on approximately US$230 million in taxes over a five-year period.