Critical Perspectives on Accounting 16 (2005) 47–59

Rehabilitation of mining sites: do taxation and

accounting systems legitimise the privileged
or serve the community?
Natalie P. Stoianoff1 , Mary A. Kaidonis∗,2
Faculty of Commerce School of Accounting and Finance, University of Wollongong,
Wollongong, NSW 2522, Australia

Received 25 January 2002; received in revised form 22 January 2003; accepted 28 February 2003

Abstract

This paper explores both accounting standards and the taxation provisions with respect to the treat-
ment of rehabilitation costs of mining entities in Australia. A special tax deduction is allowed only
for expenditure actually incurred, yet the accounting standard provides a different calculative practice
for the representation of the same event. With this example we demonstrate inconsistencies that exist
between accounting and tax and although the accounting for income taxes standard accounts for the dif-
ferences, we argue this merely legitimatises them. We challenge this false consciousness that assumes
these inconsistencies are merely incidental and point out that these two systems, of tax and account-
ing, implicitly sustain and reinforce each other. These institutional practices perpetuate the privileges,
powers and impact of the mining industry, whilst claiming to serve the community as a whole.
© 2003 Elsevier Ltd. All rights reserved.

Keywords: Rehabilitation of mining sites; Calculative practices; Public interests; Taxation system; Accounting
practices

1. Introduction

The relationship between the institutions that accounting and taxation systems repre-
sent are considered in this paper. Accounting systems in Australia are represented by the

∗ Corresponding author. Tel.: +61-2-4221-3681; fax: +61-2-4221-4297.

E-mail address: maryk@uow.edu.au (M.A. Kaidonis).
1 B.Sc. LLB MAppSc FTIA. Natalie is a senior lecturer and the Sub-Dean of the Faculty of Law, University of

Wollongong.
2 B.Sc. Dip Acc Grad Dip Acc Grad Dip Soc Sc M. Com. (Hons.) Ph.D. CPA. Mary is a senior lecturer in the

Faculty of Commerce, University of Wollongong.

1045-2354/$ – see front matter © 2003 Elsevier Ltd. All rights reserved.
doi:10.1016/S1045-2354(03)00019-4
48 N.P. Stoianoff, M.A. Kaidonis / Critical Perspectives on Accounting 16 (2005) 47–59

Accounting Profession and its related institutions such as the Australian Accounting Stan-
dards Board and the Financial Reporting Council. The taxation system to which we refer
is represented by the Australian Income Tax Asessment Act 1936 and 1997 and related
legislation. The representation of the same economic events is often treated differently by
the accounting and taxation systems. Indeed this difference in treatment between tax and
accounting is not unusual but rather an accepted practice.
However, we consider them as part of a larger system which is an “instrinsic and consti-
tutive component of the government of economic life” (Miller, 1994, p. 29). Not to consider
accounting and taxation systems as part of a larger system is reflective of the prevailing
false consciousness (Dillard, 1991; Held, 1980) that treats accounting and taxation as sep-
arate and having only technical relevance. Instead, Miller (1994) urges analysis of “the
multiple practices” of accounting which are “institutionally localized” in order to gain an
understanding of how accounting “has come to assume such a dominant position” (p. 30).
Accordingly, this paper aims to challenge this unquestioned acceptance or rationalisation of
society in terms of the institutional systems (Habermas, 1992) that accounting and taxation
represent. In this way we intend to expose an implicit relationship that has a “profound
sociological and institutional significance” (Miller, 1994, p. 31). To do this, we have fo-
cused on one industry and one aspect of one industry. This paper explores both accounting
standards and the taxation provisions with respect to the treatment of rehabilitation costs of
mining entities in Australia. We demonstrate inconsistencies that exist between accounting
and tax in the context of mining, and instead of assuming that these inconsistencies should
be treated as merely incidental, we wish to draw attention to them.
We have chosen to investigate an aspect of the natural resources industry because of
the significant economic contribution the industry makes to Australia. The operations of
this industry cannot occur without disrupting the environment. In recognition of this, the
taxation system has granted concessions for expenditure incurred to rehabilitate the mining
site (see Stoianoff, 2002). In particular, rehabilitation-related activities and expenditure in-
curred thereon has attracted a special tax deduction since July 1991. As with all allowable
deductions there is a requirement that this expenditure be incurred and not merely antici-
pated. However, this requirement is ignored in accounting standards as it is not expected
that accounting be consistent with taxation principles. The accounting treatment allows
for anticipated restoration costs, not only incurred costs, to be incorporated. Hence, future
estimated rehabilitation expenses are taken into account even when these are not allowed
as taxation deductions. This is the case whether one is using a cash system or an accrual
system of accounting.
We utilise Miller’s (1994, p. 2) discussion of accounting as a social and institutional prac-
tice to demonstrate the ability to have “transformative capacity” through financial reporting
in annual reports and taxation returns. This paper offers an overview of the relevant tax pro-
visions in order to demonstrate the “calculative apparatus” (Miller, 1994, p. 3) related to the
representation of expenditure on the rehabilitation of mining sites since the tax regime has
the capacity to transform the behaviour of mining entities, the community and ultimately
society. Then, an analysis of the accounting standard for extractive industries is provided,
with specific attention to the accounting treatment of rehabilitation of mining site expen-
diture. In this way we highlight another calculative apparatus of another institution which
influences the representation of, the responses to and the responses of mining companies.
 N.P. Stoianoff, M.A. Kaidonis / Critical Perspectives on Accounting 16 (2005) 47–59 49

It will be demonstrated that these two institutions provide different calculative practices
to represent the same activities, and these different representations will not be taken for
granted, but challenged. The accounting system and the taxation system each claims to
serve society. However, when these systems are considered together, we argue that the
implicit relationship of the institutions serves to perpetuate and legitimate the privilege of
some sectors of the society at the expense of others. In particular, the holders of capital in
the mining sector are privileged by the accounting and taxation systems. The significance
of this claim is underscored by the contribution that the natural resources industry has made
in Australia, and this context is presented next. It will be followed by a consideration of the
tax treatment of the expenditure on rehabilitation of mining sites and then the accounting
treatment thereof.

2. Australian mining industry in context

It is not an exaggeration to say that, without the minerals developments in the last one
hundred and sixty years, Australia would be a very different and very much poorer country
today. (Parbo, 2002, p. 1)3
From this quotation, it is obvious that those in the mining industry consider their contribution
to Australia to be of paramount importance. This view is confirmed by McKay et al. (2000)
from the Australian Geological Survey Organisation, who noted that
from the discovery of gold at least, [mining] has been a major contributor to Australia’s
economy and infrastructure. It has provided the nation’s basic industrial requirements,
construction materials, fuel and industrial raw materials—and has been a major earner
of export income. It has played a key role in decentralisation of both population and
industry, as towns, railways and ports were established to serve the mines and smelters.
(McKay et al., 2000, p. 136)
Even in the more recent years, mining still represents a major contributor to investment in
Australia.
Over the ten years to June 2001, $8.3b was spent on the search for minerals in Australia,
while $7.5b was spent on the search for petroleum in Australia and surrounding waters.
(Australian Bureau of Statistics, 2002, p. 7)
In the global arena, according to the USA’s National Mining Association (1998, p. 4),
Australia “produces 41 major commodities including aluminum, coal, copper, gemstones,
gold, iron ore, lead, nickel, platinum-group metals, silver, stone (crushed), talc, titanium
concentrates, uranium and zinc” and these represent approximately 10% of the world’s pro-
duction. In terms of exploration expenditure, Australia represented 17.5% of the worldwide
exploration budgets or US$ 495 million of a total of US$ 2,830 million (National Mining
Association, 1998). Even though, “since 1997, both the global and the Australian levels

3 Sir Arvi Parbo A.C. has been the chairman of many public companies, including W.M.C. Ltd. and B.H.P. Co.

Ltd.
50 N.P. Stoianoff, M.A. Kaidonis / Critical Perspectives on Accounting 16 (2005) 47–59

in exploration have declined steadily” (Australian Bureau of Statistics, 2000, p. 7), mining
continues to be a major industry in Australia.
We focus on a particular expenditure, rehabilitation, because it represents a significant
outlay which is required of the mining industry.

In 1998–1999 the Australian minerals industry provided $275m for expenditure on mi-
nesite rehabilitation, 12% higher than in the previous year and 54% higher than the
amount provided for 1996–97. Expenditure on minesite rehabilitation is expected to
increase further in 1999–2000. The accumulated balance of the provision for reha-
bilitation expenditure rose 24% to $1.2b at the end of 1998–99. The strong rise in
the balance over the past few years is consistent with an increased focus on environ-
mental rehabilitation by the minerals industry. (Australian Bureau of Statistics, 2000,
p. 132)

It was noted generally in the industry that it is influenced by global and national economic
trends, as well as taxation systems and environmental protection regimes (Australian Bureau
of Statistics, 2000). Hence, this paper explores the relationship between tax and accounting
systems with respect to the expenditure of rehabilitation of mining sites and the next two
sections considers each individually, before they are considered together.

3. Taxation provisions: calculative practices

The taxation provisions to be discussed below reflect the complexity of the calculative
practices that institutions undertake to enable transformative action (Miller, 1994). These
occur in two ways. Firstly, the provisions constitute practices by the taxation system to
influence mining companies to undertake rehabilitation activities, thereby enabling trans-
formative action of the kind that restores the physical environment. The second way in
which transformative action occurs is by the capacity of the mining companies to influence
the tax system (through, e.g. appeals to decisions and access to other legal remedies) to
allow them to reduce tax liability and to increase shareholders’ earnings. It is no accident
that a significant figure in Australian Business Tax Reform, John Ralph, has been on the
board of a number of major mining companies (Herd, 2002).
The specific recognition of environmental expenditure in the Australian income tax
system did not occur until 1991. The natural resources industry was one of the major
beneficiaries of this new taxation policy and given the significant economic contribution
that this industry makes to Australia, it is hard to argue against such benefits. The new
legislation was comprised in Division 10AB of the Income Tax Assessment Act 1936
(ITAA36), and included a special deduction for current or capital expenditure incurred on
rehabilitation-related activities on or after 1 July 1991.4 The introduction of the Income Tax
Assessment Act 1997 (ITAA97) sought to simplify and restructure the complicated legisla-
tion found in ITAA36. Accordingly, the rehabilitation provisions were streamlined into the
new SubDiv. 330-I, comprising sections 330–435 to 330–455 ITAA97. However, post the

4 Sections 124B to 124BF ITAA36.

 N.P. Stoianoff, M.A. Kaidonis / Critical Perspectives on Accounting 16 (2005) 47–59 51

Ralph Review of Business Taxes5 , a uniform system of Capital Allowances has replaced
the separate rehabilitation expenditure provisions originally found in the mining division
of the ITAA97. Now, Division 40 ITAA97, provides for a collective approach to capital
allowances effective from 1 July 2001, and in particular, SubDiv 40-H now deal with the
concessions of mining rehabilitation expenses. Indeed the Commonwealth pointed out that
rather than change the substance of ITAA36, the effect of the tax reforms is to “somewhat
simplify the legislation and make it more logical” (Commonwealth, 2001, p. 79).
Prior to 1 July 1991, expenditure incurred in relation to the rehabilitation of a mining site
would not have been deductible under the general deduction provisions, section 51(1) of
the ITAA36. This is because the taxation system considered that there was a lack of nexus
between the expenditure and the income-earning activity. Mining operations represent the
income-earning activity and as rehabilitation generally does not take place until cessation
of such operations then expenditure for such rehabilitation falls into the “capital” category
and therefore not deductible. On the other hand, where the site has been progressively reha-
bilitated during the course of the mining operations, then the general deduction provisions6
would render the expenditure deductible unless it was capital in nature.7
This distinction between capital expenditure and non-capital expenditure is considered
irrelevant for the purposes of the rehabilitation concessions, yet is a major consideration
in relation to repairs, which would be comparable expenditures (Kaidonis and Stoianoff,
2001; Stoianoff, 2002). To qualify for the concessions pertaining to mining site rehabilitation
expenditure, “the site being rehabilitated must have been used for general mining, petroleum
mining or quarrying operations or for exploration or prospecting activities” (Stoianoff,
2002, p. 140). Section 124BA ITAA36 operated for the period ending 30 June 1997, while
section 330−435 ITAA97 was the operative provision for the period 1 July 1997 to 1 July
2001. The current operative provision is section 40–735 ITAA97, effective since 1 July
2001. Accordingly, when the general deduction provisions did not prima facie apply, these
specific rehabilitation provisions provided the necessary mechanisms to enable a deduction.
We note that the legislation is careful to avoid the possibility of double deductions by
providing a limitation to the operation of section 124BA. Specifically, where expenditures
would have been eligible for a general depreciation deduction, section 124BC(3) ensured
that the operation of section 124BA did not extend to those expenditures and provide a
double deduction. Section 330–450(3) ITAA97 adopted this limitation.
Although we have not presented all the issues related to defining a mining site and the
definition of rehabilitation expenses (see Stoianoff, 2002), we have provided sufficient rules
to demonstrate that, with respect to the mining industry, rehabilitation expenditure is treated
differently to overcome sections of the tax legislation which would not normally allow a
deduction for an expenditure which is capital in nature. These tax reforms specific to the
mining industry occurred at a time when the rest of business (with some exception such as the
farming sector) was expected to give up accelerated depreciation benefits in order to gain a
lower company tax rate. Therefore, it is not unreasonable to argue that the mining sector was

5 This review was conducted on behalf of the Federal Government, the report of which was delivered in 1999,

resulting in major business and taxation reforms which were introduced from the end of 1999.
6 Either section 51(1) ITAA36 or its counterpart section 8-1 ITAA97.
7 Consider also Mount Isa Mines Ltd. case 21 ATR 1294; 91 ATC 4154 (Fed Ct); 92 ATC 4755 (High Ct).
52 N.P. Stoianoff, M.A. Kaidonis / Critical Perspectives on Accounting 16 (2005) 47–59

powerful enough to have its interests not only represented but empowered. Miller suggested
that “professionals provide rules and procedures for taking activities out of the realm of
‘moral mysteries’, and bringing them within the realm of impersonal techniques” (Miller,
1994, p. 10). The previously defined capital expenditure can now be treated as an allowable
deduction, even if it contravenes other principles and definitions of allowable deductions.
What was deemed illogical, is now supported by institutional mechanisms (provisions). In
this way legitimacy is afforded to the process and outcomes by upholding the rhetoric that
the taxation system serves society. A closer look at this claim is warranted.

4. Rehabilitation of mining sites and environmental responsibility

Tax breaks or concessions, such as those granted to the natural resources industry, ac-
knowledge the special circumstances of classes of taxpayers in the community. At the same
time, these tax concessions are implemented in order to influence taxpayer behaviour. In
recognising the social, economic and political role of taxation in society, “taxation has been
and can be used to influence or modify aspects of social behaviour and to provide benefits
to the society as a whole” (Stoianoff, 2002, p. 127). However, Waincymer (1993) points
out that a social benefit must be a benefit for all members of the society jointly and accord-
ingly a taxation system is required to prevent any “free riders” reaping the benefits without
contribution.
Certainly, the natural resources industry has provided benefits to the Australian economy
as major exporters. Much of the concessions provided to the natural resources industries
have related to the special circumstances of mining and exploration, namely, the large initial
capital expenditure and limited life span of a mine or mining venture (Hart and Sekhon,
1996). Further, these industries have a direct effect on the environment by the very nature
of their income-earning activities. It could be argued that the use of tax concessions for
rehabilitation-related activities have the objective of enhancing the environmental respon-
sibility of the natural resources sector.
The effect of the rehabilitation concession partly compensates the mining entity for the
impositions or requirements of the relevant State environmental law. Licences for explo-
ration and mining rights are generally granted to mining entities by the relevant State or
Territory Government, with the understanding that the entities have an obligation to re-
habilitate. This is accompanied by the payment of a bond or security to the relevant state
government or department. If the mining entity does not rehabilitate the site it forfeits the
bond or it may be penalised. No deduction is available for the outlay of the bond at the time
that it is paid, nor if it is forfeited. Similarly no deduction is available if the mining entity
is penalised for not rehabilitating the site. This treatment of the bond and/or penalty is still
applicable. But prior to 1 July 1991, no deduction was available for the cost of complying
with the requirement of rehabilitating the mine site, either. In other words, the mining entity
would have to weigh up its options, being: to go to the expense and effort of rehabilitating
the mine site, or, just to forfeit the bond. Accordingly, it can be argued that by providing
a deduction for otherwise non-deductible rehabilitation expenditure, it was expected that
industry would allocate necessary resources toward environmentally responsible behaviour.
This is an example of what Miller (1994) called transformative capacity of institutions. The
 N.P. Stoianoff, M.A. Kaidonis / Critical Perspectives on Accounting 16 (2005) 47–59 53

clear departure from the general rules of deductibility using a specific calculative practice,
facilitated environmentally responsible behaviour. Another calculative practice offered by
the accounting institutions needs to be considered.

5. The accounting standards: another calculative practice

The mining industry’s economic contribution to Australia is significant and this is under-
scored by the fact that the mining industry has its own accounting standard. The industry-
specific accounting standard AASB 1022 ‘Accounting for the Extractive Industries’ is
mandatory and was issued in October 1989. The commentary on restoration costs can be
taken to be a response of the industry to environmental imperatives, which may be legally
imposed or be internally imposed as company policy. Paragraph (xv) of the commentary in
AASB 1022 is worth noting:
It is frequently a condition of a permit to engage in extractive operations, that the area
covered by the permit be restored after the cessation of operations. In any case, it may be
policy of the company involved in the operations to carry out such restoration even if there
is no legal obligation to do so. Restoration costs that it is expected will be incurred are
provided for as part of the cost of the exploration, evaluation, development, construction
or production phases that give rise to the need for restoration. (Parker, 2001, p. 851,
italics in original)
In other words, the estimated future costs of restoration become part of the cost of inventory.
Therefore, when the ore etc is recognised for sale, its corresponding cost of goods sold would
include a portion of the future, estimated restoration cost, even though it is not yet incurred
for a tax law purpose. Paragraph .40 of AASB 1022 puts this concept into effect but does
not specifically refer to liabilities.
Since the Standard AASB 1022 is silent on this issue of liabilities, Abstract 4 of the
Urgent Issues Group of Australia (UIG), ‘Disclosure of Accounting Policies for Restoration
Obligations in the Extractive Industries’, takes effect (on or after 6 October 1995). Abstract 4
addresses the disclosure of the liability of restoration costs. Although paragraphs .70 and .71
of AASB 1022 refer to disclosures in the accounts and group accounts, they do not explicitly
address the disclosures of liabilities. The following detail is required by Abstract 4:
[t]he timing of the recognition of the restoration obligation; a description of the amount
of the restoration obligation; a description of the basis on which restoration costs have
been determined; whether restoration costs have been determined on a discounted basis
or not; and whether estimates are on a prospective or retrospective basis. (Parker and
Porter, 2001, p. 258)
It is important to stress that the liability need not correspond to an actual invoice but can
be prospective, that is, a reasonable estimate of the cost that will probably be incurred at a
later date. Abstract 4 provides a subtle deviation from the definition of liabilities offered by
the Statement of Accounting Concepts 4 which states that liabilities
are the future sacrifices of economic benefits that the entity is presently obliged to make
to other entities as a result of past transactions or other past events. (Parker, 2001, p. 36)
54 N.P. Stoianoff, M.A. Kaidonis / Critical Perspectives on Accounting 16 (2005) 47–59

The definition of liabilities rests on the requirement that there is a present obligation,
rather than a probable future obligation. Strictly speaking the liability disclosed in the annual
reports according to Abstract 4 need not have been incurred for tax purposes. Hence, there
is a difference between accounting and taxation as to how “incurred” is interpreted. This
is more than a difference between accrual accounting and cash accounting. The accounting
perspective is more notional, whilst the taxation perspective requires a transaction of the kind
that gives rise to an invoice. Therefore, the accounting profession has redefined expenses
and corresponding liabilities of the rehabilitation of mining sites. The calculative practices
for a specific and important industry, the mining industry, have been created and sustained
by an institution to allow financial representations of mining entities which can be quite
different from the taxation representations of the same entity and the same events.

6. An interface of tax and accounting

The earlier sections have shown that accounting and tax can treat rehabilitation costs dif-
ferently and have rules, standards and provisions in the legislation to allow for these. Indeed
it is possible for a firm that has large accounting profits as disclosed in its statement of
financial performance to pay little or no tax. While this can be perfectly legitimate, it has,
at times, created political problems for particular organisations. (Deegan, 2002, p. 504)
Not only is the difference between accounting and taxation reflective of the status quo
and “perfectly legitimate”, but this is reinforced by the accounting standard ASRB 1020:
Accounting for Income Tax (Tax-effect Accounting) (which took effect from 30 October
1989). That is, the accounting profession had developed a standard which explicitly recog-
nised that there are a number of differences between accounting principles and taxation
principles of revenue and expense recognition. This standard identified differences between
taxable income and accounting profits and categorised them into permanent differences
and timing differences. Since then, a “new improved” version of this standard has been re-
leased (and withdrawn as it was subject to much confusion), being AASB 1020 “INCOME
TAXES”. AASB 1020 identifies “assessable temporary differences” and “deductible tem-
porary differences”, whilst permanent differences are no longer relevant. This “new” AASB
1020 “represents a fundamental departure from the previous rules for accounting for taxes”
(Deegan, 2002, p. 504) as there has been a change on the basis on which the differences
are determined8 . The point to be noted is that the accounting profession has produced an-
other calculative practice which provides rules that deflect questions as to why there are
differences between two systems describing the same economic events. Instead, the stan-
dard draws attention to complex calculative practices and since the differences have been
accounted for, renders the questioning of the differences as superfluous.
In other words, the rules may create or sustain inconsistencies between the accounting and
taxation systems. As long as there are rules supported by another system, then the resultant
inconsistencies are legitimate, or valid. Hence, accounting systems and tax systems offer the

8 The new AASB 1020 uses a balance sheet approach. It is not the intention of this paper to analyse this standard

other than to use it to exemplify calculative practices.

 N.P. Stoianoff, M.A. Kaidonis / Critical Perspectives on Accounting 16 (2005) 47–59 55

rationale to enable abstract notions to be knowable (Miller, 1994) even if the calculations
are “quite complex” as it takes “a very sophisticated reader of the financial reports to be able
to understand . . . what the calculated number actually represents” (Deegan, 2002, p. 527).
That is, the calculation of rehabilitation costs gives rise to a succinct number, which masks
the various assumptions upon which its veracity relies.
Whether the original or new AASB 1020 takes effect, the fact remains that the accounting
profession has produced calculative practices of differences between tax and accounting.
The rules for accounting for taxes demonstrates the calculative practices that can be used
by the accounting profession to affect the representational means by which entities report
to their shareholders. In turn, these rules have a transformative capacity since the “reality”
they create can “alter the way in which it can be thought about and acted upon” (Miller,
1994, p. 2). For example, the kinds of decisions about resource distributions, represented
by shareholdings (and dividends) are affected by the calculative practices. Hence, calcu-
lative practices created and invoked by the accounting profession, through its institutional
structures (e.g. the Australian Accounting Standards Board) legitimate the transformational
action by and for whom such institutions exist.
By treating accounting and taxation systems as unrelated, enables the maintenance of
each institution by not drawing attention to each others incongruencies and/or claims to
rationalities. In effect, this lack of attention or false consciousness allows for a “reciprocal
enforcement” (Habermas, 1992, p. 125) of these systems. In the final section we argue
that this reciprocal enforcement matters because it has impacts on public interest as well
as on the specific sector of the mining industry. It is here that it is imperative that we ask
whether the accounting and tax systems serve the community or legitimise the privileged.
We illustrate the sociological and institutional significance (Miller, 1994) in the following
section.

7. Serving community interests or legitimising the privileged

The significance of the reciprocal enforcement of the tax and accounting systems rests
with the considerable contribution the mining industry makes to the Australian economy.
As stated earlier, the rehabilitation expenses of the mining industry were AUD1.2b in
1998–1999 (Australian Bureau of Statistics, 2002) and hence the impacts on the financial
reports and responses thereon, should not be underestimated.
Institutions emerge with the rhetoric that interests of the members of that institution are
best represented and served collectively. Further, these member institutional interests are
couched in terms of serving the public interest. These claims are made by the accounting
profession and by the taxation system and need to be considered.
The accounting profession lays claims to be for the public interest through its codes of
professional conduct requirements which makes specific reference to “The Public Interest”,
where members of the profession

[m]ust at all times safeguard the interests of their clients and employers provided they
do not conflict with the duties and loyalties owed to the community and its laws. (Parker,
2001, p. 1388)
56 N.P. Stoianoff, M.A. Kaidonis / Critical Perspectives on Accounting 16 (2005) 47–59

The reference to the community is also made in the Statement of Accounting Concepts
2 (SAC2). As well as providing information for resource allocation decisions, it could also
be considered that social benefits are objectives of annual financial reporting. According to
the SAC2 paragraph 12:
Reporting entities control resources and influence members of the community through
providing goods and services, levying prices, charges, rates and taxes, and acquiring and
investing resources. The community interest is best served if scarce resources controlled
by reporting entities are allocated to those entities which will use them in the most efficient
and effective manner in providing goods and services. (Parker, 2001, p. 16)
This objective of general purpose financial reporting is congruent with the notion that
the financial decisions by the providers of capital, produces the optimum social returns.
Providers of capital through their resource allocation decisions (buying and selling of shares)
are meant to be served by the accounting profession’s reporting objectives. It can be ex-
trapolated from SAC2, then, that serving shareholders’ interests also serves the community
and/or society. Whether shareholders’ interests are a surrogate for society’s interests is
worth considering.
The taxation system is the State’s mechanism to enable equity across the whole of the
society it represents and it is in this way that the taxation system can be said to serve the
public interest. The purpose of the tax system is to provide three functions: the provision
of merit and social goods, that is, goods and services which are available to the public; to
provide for those in need of welfare (e.g. the elderly, the unemployed, the disabled); and
to correct the imperfections of the free market (Woellner et al., 2001). The way that the
tax system is evaluated is the ability to satisfy the criteria of fairness and equity, simplicity,
efficiency and fiscal adequacy among others. If taxation law is used to support environmental
law by encouraging environmentally responsible behaviour, then could it be argued that this
influences good citizenship? Funnell and Cooper (1998, p. 40) noted that “citizenship carries
with it a broad range of privileges and responsibilities, of which the consumption of goods
and services is only a small part”. It can be assumed that the rehabilitation effort by the
mining entities constitutes a social and environmental benefit. In this way, the mining entity
can be considered a “good corporate citizen” and be celebrated for its economic contribution
to the country, rather than be vilified for its environmental destruction. Therefore, one can say
that the shareholders of the mining company, benefit by the company having to pay less tax.
Hence, the institutions of accounting and taxation have duties and loyalties to serve the
community. The concept of duties and loyalties are also integral to the State which has to
consider the generalizable interests of the population as far as necessary to retain mass
loyalty and prevent a conflict-ridden withdrawal of legitimation. (Habermas, 1992,
p. 291)
It can be argued that tax serves a broader concept of society, whilst accounting reporting
is a representation of a corporation’s financial performance and allows shareholders to
evaluate their investments therein. In this sense, both accounting and tax systems serve
aspects of the community, but not necessarily the same sections and therefore it is justifiable
to treat the two systems as independent. However, it is by looking at the two systems
together as they apply to a specific sector that competing interests can be unveiled and this
 N.P. Stoianoff, M.A. Kaidonis / Critical Perspectives on Accounting 16 (2005) 47–59 57

is demonstrated by our example of the treatment of mining site rehabilitation expenditure in

particular.
A tax deduction for rehabilitation expenditure enables a lower taxable income and lower
tax to be paid by the mining company. The environment is rehabilitated and so we can say
that there is a benefit to society, or at least a benefit to those concerned about the environment.
The taxing country, in this case Australia, foregoes revenue and this can be interpreted to be
the cost society is prepared to pay for a rehabilitated site. At the same time, the shareholders
of the mining company benefit because there are more dividends to distribute.
However, do the shareholders benefit from accounting’s treatment of rehabilitation ex-
penditure (future or actual)? If the cost of rehabilitation is reflected in the selling price of
the ore, then the consumer of the ore, in effect, pays for the rehabilitation, not the share-
holder. Therefore, the shareholder can be said to benefit. In this way, the tax deduction
and corresponding rehabilitation enables companies to appear socially responsible to one
class of citizens, while financially benefiting for the environmental destruction the company
caused in the first place. However, if the selling price does not reflect the accounting cost of
rehabilitation, then the company is not covering itself for its long-term actual rehabilitation
costs. It could forfeit its bond and walk away from its responsibility to rehabilitate and
therefore not get a tax deduction for rehabilitation. Another scenario is to consider what
happens if the company had represented itself in its financial reports to have accounted for
the cost of rehabilitation, even if, at the end of the life of the mine, it is not financially
worthwhile to actually spend the money to rehabilitate. The cost of forfeiting the bond or
incurring a fine for not rehabilitating may be more “rational” than actually rehabilitating the
mining site. The calculative and representational practice offered by accounting enables the
company to walk away from its responsibility and look as if it is being financially rational.
Therefore, the calculative practice legitimates and obfuscates the mining companies’ respon-
sibilities and instead privileges and empowers them in the society in which they operate.
The privilege and power of the mining companies is sustained by the significant economic
contribution of the mining industry, to the extent that making a plea for the environment is
marginalised.

8. Conclusion

Accounting allows for future estimated expenditure which has not been incurred to be
accounted for in periods prior to the activity of the rehabilitation (usually at the end of
the mine’s economic life). This allows for a particular construction of reality. That is, a
particular accounting practice is invoked through accounting standards which allow a par-
ticular financial representation, to which shareholders respond. Another set of calculative
practices, this time allowed by the taxation system, can be invoked to create another set of
representational practices for the same entity and the same activity. These representations
are legitimated by the claims to transformative capacity, of the kind which presents the min-
ing entities, which created the environmental destruction, to appear as if they are fulfilling
their environmental responsibilities. In turn, these entities can be said to have fulfilled their
social obligations and hence be good corporate citizens. Whether social benefits can be had
by all is questionable and certainly the validity of such claims needs to be challenged. But
58 N.P. Stoianoff, M.A. Kaidonis / Critical Perspectives on Accounting 16 (2005) 47–59

first some questions need to be raised. Who or what is the community/society: is its compa-
nies, shareholders, employees, the environment, current generations or future generations?
If shareholders represent the only sector to benefit, can the accounting or tax institutions
claim they have served the community or society overall?
The mining company, accounting standards and the taxation system (the State) act seem-
ingly independently to privilege a particular class of citizen (providers of capital), while at
the same time claim to be acting for the benefit of society as a whole. We conclude, that the
independence of these institutions act to obfuscate their role in perpetuating the privileges,
powers and impact on the society in which they claim to serve.

Acknowledgements

We would like to thank Dr. Chris Carter who was our discussant at the Critical Perspectives
on Accounting conference, New York, April 2002, for his helpful comments and insights.
The authors are grateful for the contribution of the Law Society of NSW through the Public
Purpose Fund Legal Scholarship Support Scheme enabling Natalie Stoianoff to present this
paper at this conference. We also thank the participants of the Legal Intersections Research
Centre of the Faculty of Law, University of Wollongong, for their feedback. We also thank
our anonymous reviewers who helped focus our arguments.

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