B.C. mining task force warns of a bleak future

Established last year at the request of the British Columbia government, The Mineral Industry Task Force has concluded that the province “might not have a significant mining industry by 1996.”

Its findings were presented to Premier William Vander Zalm in Victoria recently and government reaction to the report has been subdued, to say the least. By following through with the recommendations, the government would stand to lose about $137 million in revenues at a time when reducing the provincial deficit is a major item on its agenda.

The exhaustive study was tabled later than expected so a former cabinet minister, Tom Waterland, could comply with new conflict of interest guidelines set down by the government. He resigned his cabinet post last August to become president of the Mining Association of B.C., which played the leading role in preparing the study.

The report chastises the government for contributing to the industry’s woes. Among key short-term recommendations, the task force called for the removal of provincial sales tax on all consumables used in the mining and milling process. It noted that B.C. was the only province to charge such a tax.

Other key items included: removal of the coal royalty, elimination of the water rental fees, dropping the provincial sales tax on machinery and equipment, and eliminating the motive fuel tax on diesel used by B.C. railways.

The report also argued that the Mineral Resource Tax Act and Mining Tax Act be deductible from provincial income tax calculations and it asked that loss carryovers be allowed for both those acts and the concept of pooling under the Mineral Resources Tax Act.

Mr Waterland told the premier that B.C. “was the highest tax jurisdiction in Canada,” noting that it compares unfavorably internationally as well. The main reasons for this, he said, were the sales tax, coal royalty, and the nature of profit- based taxation. He argued that the gross amount of $137 million would be substantially offset through a more active and profitable industry. With lower operating costs, the industry would be much more profitable and pay higher profit-based taxes, he concluded. This would lower the gross cost to government to under $100 million.

Pointing out the industry spent nearly $250 million on energy in 1985, he said it represented a “major portion of mine operating costs.” Affecting energy costs were: water rentals, high construction costs for transmission lines, and policies that discourage and prevent private power generating and transmission facilities. “B.C.’s energy costs are amongst the highest of all Canadian provinces because B.C. has high water rental rates,” he said.

Although a reduction in taxation, energy and transportation costs would help put the industry back on its feet, he said the government would have to establish comprehensive policies that would create an atmosphere of stability in the province. Incentives for mineral exploration and mine development were also important, he added.

A number of non-tax-related recommendations were also made including increased prospectors’ assistance, extending the Financial Assistance for Mineral Exploration program (FAME) another year, plus cost sharing for exploration roads. Last year’s FAME program totalled $5 million but exploration incentives in B.C. were still far behind those in other provinces.