Report finds potash tax regime needs reform

The world’s top potash producer, Saskatchewan, needs to reform its tax policies for miners of the mineral, says a University of Calgary professor.

Saskatchewan produces more than 30% of the world’s potash. But U of C economist Jack Mintz says the province’s potash tax regime is among the world’s most complex and inefficient, and the least competitive.

Read: Miners pin hopes on long-term growth

“The convoluted nature of Saskatchewan’s regime benefits no one — not producers, investors, or the provincial government, which is left without any revenue certainty from its most significant natural resource,” says Mintz. “In recent years, where potash production and sales value rebounded substantially in Saskatchewan from 2009 levels, excessive tax allowances resulted in the province incurring three years of tax revenue losses from its potash production tax.”

Read: Brighter days ahead for provincial economies

New Brunswick is also a top potash supplier. It recently imposed higher taxation on risky projects, but “greater efficiency can be achieved by using a royalty system that is mainly rent-based,” says Mintz.

He adds that poorly designed policies are hindering both provinces’ economic potential. So, both provinces should convert potash levies to a rent-based royalty regime that taxes only revenues, net of capital spending and operational costs. Any existing levies could be combined into a single royalty that is a steady revenue source for the provinces.

Read: Four keys to mining success

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.