Editorial Mixed review for B.C. minerals tax

Of most concern however, is a minimum tax — fine for manufacturing industries but difficult to justify for the mining sector, where exploring for and building mines entails dealing with a myriad of risks not encountered in the non-mining sector.

According to the MABC, the proposed minimum tax will have a negative impact on the mining industry. The MABC argues that such a tax will be paid at an earlier date by new mines, thereby reducing future returns and making mining investments in general, less attractive to investors.

Although the tax rate is modest for metal mines, the same can’t be said for coal mines — which have suffered through a prolonged period of weak prices for their products. The new mineral tax will also remain non-deductible when a company determines its provincial tax.

On a positive note, the MABC was pleased to see that the coal royalty, which hit every coal mine where it hurt most — on the bottom line — will be removed, a step welcomed by coal operators. Removal of the royalty will provide more financial leeway to weather the current depressed market for B.C. coal. In the past, a mine paid a royalty regardless of whether it was making or losing money.

In fact, the Ministry of Energy, Mines and Petroleum Resources acknowledged that the onerous royalty was affecting the very viability of some of the province’s coal mines. Unfortunately, the same foresight which was applied towards the coal sector eluded the bureaucrats who concluded that Cominco Ltd.’s water rental fees for its smelter at Trail should be hiked from $200,000 per year to $9 million — a move which prompted a Cominco spokesman to speculate on when the government would consider introducing a sunlight tax.

That lack of foresight and inflexibility cost British Columbia another 100 long-term mining jobs, $130 million in capital expenditures required for the Trail expansion and 600 man-years in construction work.

Mixed signals coming from British Columbia’s Social Credit government are no way to build the type of economic climate required to promote a strong mining industry.

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