205
existing resource royalty regime. For example, an economic analysis done by experts for the
Gwich’in Tribal Council found that the current Resource Revenue Sharing agreement does not
reflect principles of equalization fairness. However, the report concluded that Devolution under
these terms would be beneficial, though not optimal (Irlbacher-Fox 2012; GNWT 2011). In spite of
ongoing discussions in the NWT about the devolution deal’s shortcomings, including the 5% cap
and clawback provisions in the Resource Revenue Sharing agreement, NWT Legislators voted 17-1
in favor of Devolution on June 5, 2013.7 It is possible that a future review of the Resource Revenue
Sharing agreement could result in renegotiating the agreement to reduce the clawback.
The Resource Revenue Sharing agreement is a deal struck under a royalty regime that sells resources
located in the NWT relatively cheaply by global standards, informing the question that continues to
be debated by citizens, elected leaders and analysts: Is the NWT getting a fair deal for its resources?8
For example, in 2011, less than $100 million was collected in royalties on NWT exports worth over
$2 billion, though exact figures are unavailable in Canada (Government of Canada - Natural
Resources Canada 2011; Irlbacher-Fox 2012).
15%
IRR
30%
IRR
Figure 1: Government take from mining across the globe, comparing average effective tax rates across jurisdictions for
projects with 15% and 30% real internal rate of return (IRR) before tax.9
As outlined in Figure 1, the combined federal-territorial ‘government take’ in the NWT is low by
global standards. Since 2003, Canadian jurisdictions have implemented tax rate reductions of a larger
magnitude than any other major mineral-producing jurisdictions, while retaining general corporate
tax deductions and tax credits for the mining sector (Government of Canada - Natural Resources
Canada 2011). In fact, Duanje Chen and Jack Mintz of the University of Calgary’s School of Public
Policy argue that Canada’s mining-tax system should be modernized, and provinces should eliminate
these preferential and wasteful tax breaks for the mining industry. In their analysis, provincial
treasuries cannot afford these tax breaks, and neither can the Canadian economy as a whole (2013).10
Daitch, Schwann, Bauer, Dias & Fan Li