Digging Dirt: BHP Billiton in Chile

Accusations of corporate tax evasion also abounded in Chile. A paper published in a volume by World Economy, Ecology and Development (WEED), examined why most private mining companies operating in that country do not publish financial results or pay taxes.97 It focused on one company which is regarded as more responsible, because of the fact that it publishes its financial results, pays some tax, and voluntarily supports a variety of social projects. That company is Minera Escondida, the world's largest private copper mining operation, owned by BHP Billiton. A comparative study of the financial results of Minera Escondida and the State-owned mining company found that the former might not be as responsible as some assume. The central claim is that by not refining its copper in Chile but selling it as concentrates, mainly to a consortium of refiners related to its ownership structure, the Billiton subsidiary Escondida has fewer earnings than its State equivalent, per ton of copper produced (even after corrections for transport and refining charges). The study asserts that the losses of tax revenue to Chile as a result are between 125 and 212 million dollars a year, from 1998 to 2002. The author Manuel Riesco told the JCC that something must be wrong when "Chile is providing private companies access to rich mineral deposits at almost no charge at all."

Earlier in the year the paper's main findings were presented to the president of the special commission of the Chilean Senate that considers the financial practices of the mining industry. The Senate considered that the findings were serious enough to send the study to the taxing agency as well as the Mining and Finance cabinet ministers. Arguments ensued between the different ministries and senators, with the press reporting the debate. As a result, a new bill, which would establish a royalty on mining exports, was tabled and discussed in Parliament.

That a revised version of the paper was scheduled to be published by the United Nations raised further alarm in BHP Billiton.98 They commissioned Pontificia Universidad Católica de Chile (PUC) to prepare a study countering the claims made in Riesco's study. Instead of addressing the key claims, the PUC paper showed Escondida was a greater contributor of taxes than its private competitors, and documented the social and environmental projects that benefit from the company donating of 1% of its pre-tax earnings.99 This reflects three aspects of CSR that are often used for questionable effect in public discourse. First is the notion that "best-in-class" is good enough: if you are better than the rest of your competitors then you can be regarded as socially and environmentally responsible. Second, is that the presence of voluntary projects funded by profits reduces the need to question about how those profits were arrived at. Third, that voluntary positive actions negate the need for regulatory innovations. But should CSR initiatives be used in the fight against paying taxes? Or is payment of tax a basic responsibility? In a letter to the chair of UNRISD's board, Jorge Lavandero Illanes, of the Chile Senate, Andrés Varela García, President of CENDA (Centre of National Studies on Alternative Development) and Tomás Moulian Emparanza, of ARCIS university argued that "CSR should first consider respect for taxing obligations that exist in countries that host [transnational corporations] as well as, and particularly, respect for the sovereign right of each country to dispose of its natural resources as it considers best."100 By September the legislative initiatives had stalled, with stiff resistance from mining companies: a clear case of the political influence of corporations being a valid concern for corporate citizenship.