UK Report on Payments to Governments 2016

RNS Number : 2227S

South32 Limited

19 December 2016

 

South32 Limited

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

(ACN 093 732 597)

ASX/JSE/LSE Share Code: S32

ISIN: AU000000S320

SOUTH32

PAYMENTS TO GOVERNMENTS REPORT

2016

Introduction

South32 cares about the communities in which we operate. We strive to deliver on our commitments and rely on each other to do the right thing. This Payments to Governments Report is consistent with our Values and our commitment to ethical business practices and high levels of corporate governance.

We believe companies should be open and transparent with their tax payments made to governments and communities around the world. Transparency of taxes helps maintain community confidence about the value which is being created from resource development.

In the year ended 30 June 2016, globally we paid US$326.3M in taxes, royalties and other payments. Our global effective underlying tax rate was 36.6% and once royalties of $144.8m are included the rate increases to 59.5%.

In November, we released our Tax Transparency and Payments to Governments Report 2016 which is available for download from our website www.south32.net/investors-media/annual-reporting-suite. Extracts of this report provided below meet the requirements of the United Kingdom's (UK) Report on Payments to Governments Regulations 2014 (UK Regulations) which implements Chapter 10 of the European Union (EU) Accounting Directive.  These extracts also address our reporting obligations under DTR 4.3A of the Financial Conduct Authority Disclosure and Transparency Rules. 

Our full report meets requirements of the Australian Board of Tax Voluntary Tax Transparency Code and provides further information in relation to our tax balances, approach to tax governance and international related party dealings.   

South32 also supports 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 including the recent move towards requesting the disclosure of beneficial ownership structures.

To ensure all stakeholders can understand the information in this report, we have outlined the approach adopted in its preparation and the meaning of technical terms used throughout. These explanations can be found in the Basis of Preparation and 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 2016

US$M	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)	Net taxes refunded
Australia
Government of Australia	5.3	-	5.7	1.8	12.8	-	10.2	23.0	159.7	(151.4)
Government of Northern Territory	-	39.9	-	-	39.9	2.7	-	42.6	-	-
Municipality of George Town	-	-	-	-	-	-	0.1	0.1	-	-
State of New South Wales	-	-	40.5	-	40.5	9.3	5.2	55.0	-	-
State of Queensland	-	-	39.2	-	39.2	2.7	0.7	42.6	-	-
State of Tasmania	-	-	-	-	-	0.8	-	0.8	-	-
State of Western Australia	-	-	20.8	-	20.8	15.5	7.3	43.6	-	-
Townsville City Council	-	-	-	-	-	-	0.1	0.1	-	-
Australia: Total	5.3	39.9	106.2	1.8	153.2	31.0	23.6	207.8	159.7	(151.4)
Brazil
Government of Brazil	38.8	-	-	-	38.8	-	0.8	39.6	0.4	(13.4)
State of Rio de Janeiro	-	-	-	-	-	-	-	-	-	0.6
Brazil: Total	38.8	-	-	-	38.8	-	0.8	39.6	0.4	(12.8)
Colombia
Government of Colombia	(23.3)	-	22.5	0.9	0.1	-	6.1	6.2	5.8	4.7
Municipality of Montelibano	-	-	-	-	-	-	0.6	0.6	-	0.4
Colombia: Total	(23.3)	-	22.5	0.9	0.1	-	6.7	6.8	5.8	5.1
Mozambique
Government of Mozambique	-	-	4.0	-	4.0	-	-	4.0	2.6	(0.5)
Mozambique: Total	-	-	4.0	-	4.0	-	-	4.0	2.6	(0.5)
South Africa
Government of South Africa	45.9	-	18.2	-	64.1	-	-	64.1	90.5	(149.3)
South Africa: Total	45.9	-	18.2	-	64.1	-	-	64.1	90.5	(149.3)
Switzerland
Government of Switzerland	2.1	-	-	-	2.1	-	-	2.1	-	-
Switzerland: Total	2.1	-	-	-	2.1	-	-	2.1	-	-
United Kingdom
Government of United Kingdom	1.9	-	-	-	1.9	-	-	1.9	1.4	(0.3)
United Kingdom: Total	1.9	-	-	-	1.9	-	-	1.9	1.4	(0.3)
Total taxes paid	70.7	39.9	150.9	2.7	264.2	31.0	31.1	326.3	260.4	(309.2)

Total Payments to Government by Project 

Table 2 Total payments to government by project for year ended 30 June 2016

US$M	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)	Net taxes refunded
Cannington - Australia	-		-	39.2	-	39.2	2.6	1.0	42.8	18.1	(2.0)
Illawarra Metallurgical Coal - Australia	-		-	40.5	-	40.5	9.3	5.5	55.3	49.4	(27.1)
Worsley Alumina - Australia	-		-	20.8	-	20.8	11.6	15.2	47.6	50.9	(72.8)
Cerro Matoso - Colombia	(23.3)		-	22.5	0.9	0.1	-	6.7	6.8	5.8	5.1
South Africa Energy Coal - South Africa	1.7		-	17.8	-	19.5	-	-	19.5	52.9	(54.1)
Total extractive project related payments - Subsidiaries		(21.6)	-	140.8	0.9	120.1	23.5	28.4	172.0	177.1	(150.9)
Equity accounted investments (EAIs)
Australia Manganese - Australia	5.3		39.9	5.7	1.8	52.7	2.8	1.0	56.5	14.5	(16.2)
South Africa Manganese - South Africa	-		-	0.4	-	0.4	-	-	0.4	6.4	(14.9)
Total extractive project related payments including EAIs	(16.3)		39.9	146.9	2.7	173.2	26.3	29.4	228.9	198.0	(182.0)
Non-extractive project related payments	87.0		-	4.0	-	91.0	4.7	1.7	97.4	62.4	(127.2)
Total taxes paid	70.7		39.9	150.9	2.7	264.2	31.0	31.1	326.3	260.4	(309.2)

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 African Aluminium operations, Brazil Alumina operations, Mozambique Aluminium operations, equity accounted Australian manganese alloy operations, equity accounted South African metalloy 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 African Aluminium operations, Brazil Alumina operations, Mozambique Aluminium operations, equity accounted Australian manganese alloy operations, equity accounted South African metalloy operations 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.

 

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