Payments To Governments Report 2018

RNS Number : 0965B

South32 Limited

18 September 2018

 

South32 Limited

(Incorporated in Australia under the Corporations Act 2001 (Cth))

(ACN 093 732 597)

ASX/JSE/LSE Code: S32 ADR: SOUY

ISIN: AU000000S320

www.south32.net

SOUTH32

PAYMENTS TO GOVERNMENTS REPORT

2018

INTRODUCTION

South32 cares about the communities in which it operates and delivers on its commitments. Publishing an annual Tax payments made by country and level of government allows us to demonstrate that our tax affairs are conducted in accordance with our corporate values and commitment to ethical business practices.

We believe that tax transparency helps build community confidence about the value created from resource development. We support initiatives that require companies to publicly share their data, including payments made to governments and communities.

In the year ended 30 June 2018, we paid US$847.6 million in taxes, royalties and other payments. The US$332.4 million increase on the payments made in the prior year reflects increased profitability and the absence of prior year tax losses available to reduce income tax liabilities to the same extent as in 2017. Our underlying effective tax rate was 27.9 per cent and once royalties of US$147.2 million are included, the rate increases to 36.0 per cent.

This report outlines our approach to tax governance, details our tax payments to governments on a country by country and project by project basis, explains our accounting income tax expense and provides a summary of our international related party dealings.

Our report meets the requirements of the following tax transparency measures:

■ United Kingdom's (UK) Report on Payments to Governments Regulations 2014 (UK Regulations), including the tax

     Strategy reporting requirement

■ Chapter 10 of the European Union (EU) Accounting Directive

■ Global Reporting Initiative Sustainability Reporting Guidelines

Fuller Transparency information, consistent with the Australia Board of Tax Voluntary Tax Transparency Code, is published in the Tax Transparency and Payments to Government Report on South32 website:

https://www.south32.net/investors-media/annual-report-suite

Providing information which meets the requirements of these disclosure initiatives, some of which are voluntary, ensures that we are providing tax transparency beyond the mandatory legislative requirements applicable to our operations.

We support the Extractive Industries Transparency Initiative (EITI) and provides a financial contribution to the EITI through our membership of the International Council on Mining and Metals (ICMM). This membership supports the EITI's ongoing activities of promoting open and accountable management of mineral resource wealth.

A description of technical terms used in this report and information regarding the approach adopted in compiling the data presented can be found in the Basis of Preparation and the Glossary.

Total Payments made by Country and Level of Government

Table 1 Total payments made by country and level of government for year ended 30 June 2018

US$M1[1]	Corporate income tax	Royalty related taxes	Royalties	License fees	Payments to governments for UK Regulations purposes	Employer payroll taxes	Other taxes and payments	Total government payments borne	Employee payroll taxes (not borne)2	Net taxes refunded
Australia
Government of Australia	338.3	-	10.6	-	348.9	-	7.1	356.0	164.6	(110.9)
Government of Northern Territory	-	107.7	-	0.1	107.8	3.3	0.5	111.6	-	-
Municipality of George Town	-	-	-	-	-	-	0.1	0.1	-	-
State of New South Wales	-	-	43.3	0.1	43.4	9.8	11.0	64.2	-	-
State of Queensland	-	-	25.1	0.2	25.3	3.2	0.5	29.0	-	-
State of Tasmania	-	-	-	-	-	1.0	-	1.0	-	-
State of Western Australia	-	-	21.1	-	21.1	15.9	5.1	42.1	-	-
Townsville City Council	-	-	-	-	-	-	0.1	0.1	-	-
Australia: Total	338.3	107.7	100.1	0.4	546.5	33.2	24.4	604.1	164.6	(110.9)
Brazil
Government of Brazil3	12.7	-	-	-	12.7	-	1.4	14.1	0.5	0.5
Brazil: Total	12.7	-	-	-	12.7	-	1.4	14.1	0.5	0.5
Colombia
Government of Colombia	11.2	-	34.9	0.8	46.9	-	5.0	51.9	3.3	0.7
Municipality of Montelibano	-	-	-	-	-	-	0.9	0.9	-	0.3
Colombia: Total	11.2	-	34.9	0.8	46.9	-	5.9	52.8	3.3	1.0
Mozambique
Government of Mozambique	-	-	5.4	-	5.4	-	0.1	5.5	2.7	-
Mozambique: Total	-	-	5.4	-	5.4	-	0.1	5.5	2.7	-
South Africa
Government of South Africa	127.4	-	37.0	-	164.4	-	0.4	164.8	113.2	(202.4)
South Africa: Total	127.4	-	37.0	-	164.4	-	0.4	164.8	113.2	(202.4)
Singapore
Government of Singapore	2.8	-	-	-	2.8	-	-	2.8	0.2	-
Singapore: Total	2.8	-	-	-	2.8	-	-	2.8	0.2	-
Switzerland
Government of Switzerland4	2.9	-	-	-	2.9	-	-	2.9	-	-
Switzerland: Total	2.9	-	-	-	2.9	-	-	2.9	-	-
United Kingdom
Government of United Kingdom	0.5	-	-	-	0.5	-	-	0.5	1.9	(0.5)
United Kingdom: Total	0.5	-	-	-	0.5	-	-	0.5	1.9	(0.5)
Netherlands
Government of Netherlands	0.1	-	-	-	0.1	-	-	0.1	-	-
Netherlands: Total	0.1	-	-	-	0.1	-	-	0.1	-	-
Total taxes paid5	495.9	107.7	177.4	1.2	782.2	33.2	32.2	847.6	286.4	(312.3)

Total Payments to Government by Project 

Table 2 Total payments to government by project for year ended 30 June 2018

US$M6[2]	Corporate income tax		Royalty related taxes	Royalties	License fees	Payments to governments for UK Regulations purposes	Employer payroll taxes	Other taxes and payments	Total government payments borne	Employee payroll taxes (not borne)7	Net taxes refunded
Cannington - Australia	-		-	25.1	0.2	25.3	3.2	0.6	29.1	18.5	-
Illawarra Metallurgical Coal - Australia	-		-	43.3	0.1	43.4	9.8	11.2	64.4	51.0	-
Worsley Alumina - Australia	-		-	21.1	-	21.1	10.5	11.2	42.8	48.8	(68.1)
Cerro Matoso - Colombia	11.2		-	34.9	0.8	46.9	-	5.9	52.8	3.3	1.0
South Africa Energy Coal - South Africa	9.5		-	17.4	-	26.9	-	-	26.9	62.7	(72.1)
Total extractive project related payments - Subsidiaries		20.7	-	141.8	1.1	163.6	23.5	28.9	216.0	184.3	(139.2)
Equity accounted investments (EAIs)
Australia Manganese - Australia	149.2		107.7	10.6	0.1	267.6	4.3	1.5	273.4	19.5	(22.7)
South Africa Manganese - South Africa	33.9		-	19.6	-	53.5	-	-	53.5	8.9	(24.5)
Total extractive project related payments including EAIs	203.8		107.7	172.0	1.2	484.7	27.8	30.4	542.9	212.7	(186.4)
Non-extractive project related payments	292.1		-	5.4	-	297.5	5.4	1.8	304.7	73.7	(125.9)
Total taxes paid8	495.9		107.7	177.4	1.2	782.2	33.2	32.2	847.6	286.4	(312.3)

Table 3 Reconciliation between Total Tax payment to Consolidated Cash Flow in Annual Report year ended 30 June 2018

		US$M
Income tax paid per 2018 Annual Report		(305.9)
Include: Our share of payments related to Equity Accounted Investments		(186.8)
Include: Income tax payments offset against other tax receivables in Brazil		(1.7)
Remove: Foreign exchange movements on withholding taxes payable	(1.5)
Corporate Income Tax Paid	(495.9)

Basis of Preparation

Our report discloses information that satisfies the requirements of the UK Reports on Payments to Governments Regulations 2014 (SI 2014/3209).

Our report includes payments to governments made by South32 Limited and its subsidiaries. We have also included payments to governments for equity accounted investments where South32 has a greater than 50% ownership interest. 

Payments have been disclosed in US dollars in line with the South32 functional currency for consolidated accounting purposes and where relevant, payments have been translated from the applicable local currency to US dollars at the exchange rate on the date of the payment.

In accordance with the UK Reports on Payments to Governments Regulations 2014 and the EU Accounting Directive the payments to government by project table provides detail on a project by project basis for payments relating to extractive operations only. However, to allow the project by project table to be reconciled to the other disclosures, all payments relating to non-extractive projects have been included in the table as a singular line item. South32's non-extractive projects include our South Africa Aluminium operations, Brazil Alumina operations, Mozambique Aluminium operations, equity accounted Australian Manganese Alloy operations, equity accounted South Africa Manganese Alloy operations and companies which provide services (management, marketing or financing) or are limited to holding investments.

Glossary of terms and abbreviations

Corporate Income Taxes

Payments to governments (net of refunds) based on taxable profits, including withholding taxes paid on dividends, interest or royalties. Generally, these taxes are reflected in the corporate income tax returns made to government and included as income taxes in the Consolidated Income Statement. 

Employer Payroll Taxes

Payments to governments in relation to South32's capacity as an employer. These taxes are calculated as a percentage of salary, wages and on-costs and are paid on a monthly basis.

Extractive

Any activity involving the exploration, prospection, discovery, development, and extraction of minerals, oil, natural gas or other materials. All of South32's mining and processing operations are extractive in nature except the Aluminium and Alumina operations.

Fees

Payments to governments where no specific service is attached but rather levies on the initial or ongoing right to use an area for extractive activities.

Government

Any national, regional or local authority of a country and includes any department, agency or undertaking controlled by such an authority.

Net Taxes Refunded

South32 claims refunds of transactional taxes (for example, Goods and Services Tax (GST), Value Added Tax (VAT) and Fuel Tax) paid to suppliers for in-country purchases of goods, services and eligible fuel, and also collects GST/VAT in respect of certain sales. 

NON Extractive

Any activity which does not involve the exploration, prospection, discovery, development, extraction of minerals, oil, natural gas or other materials. South32's non extractive operations include South Africa Aluminium operations, Brazil Alumina operations, Mozambique Aluminium operations, equity accounted Australian Manganese Alloy operation, equity accounted South Africa Manganese Alloy operation and any companies that provide services (management, marketing or financing) or are limited to holding investments.

Other Taxes and Payments

Payments to governments under other legislated tax rules where no specific service is attached, include fringe benefits tax, property tax, stamp duty, environment taxes, wealth tax and other levies/charges.

Payment

An amount paid whether in money or in kind.

Project

Operational activities that are governed by a single contract, licence, lease, concession or similar legal agreement and form the basis for payment of liabilities to a government.  Where multiple such agreements are substantially interconnected, this is considered a single project.

Royalties

Payment to governments in respect of revenue or production related to extraction of minerals or metals.

Royalty Related Taxes

Payments to governments in respect of profits from the extraction of natural resources. Royalty related taxes are presented as income tax in the Consolidated Income Statement.

South32

South32 Limited is the parent company of the South32 Group of companies. Unless otherwise stated, references to South32 and the South32 Group, the Company, we, us and our, refer to South32 Limited and its controlled entities, as a whole. South32 shares trade on the ASX, JSE and LSE under the listing code of S32.

JSE Sponsor: UBS South Africa (Pty) Ltd
18 September 2018

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[1] Payments reported are the portion of the total payment that relates to South32's ownership.

² These taxes are deducted by the company from employee's remuneration and remitted to the revenue authorities on the employee's behalf.

³ Includes on-cash corporate income tax payments of US$1.7 million offset against net taxes refunded.

⁴ Jointly controlled Swiss company which ceased performing manganese marketing activities during the 2017 financial year was placed into liquidation in the 2018 financial year.

⁵ Refer to table 3 on page 3 for a reconciliation to corporate income tax paid (US$305.9 million) to the income tax paid as shown in the Consolidated Cash Flow Statement of our 2018 Annual Report.

6 Payments reported are the portion of the total payment that relates to South32's ownership.

⁷ These taxes are deducted by the company from employee's remuneration and remitted to the revenue authorities on the employee's behalf.

⁸ Refer to table 3 for a reconciliation to corporate income tax paid (US$305.9 million) to the income tax paid as shown in the Consolidated Cash Flow Statement of our 2018 Annual Report.

 

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