Editorial Tax grab hurts everyone in the long run

Perhaps most important, the project would have gone a long way to ensuring Canada remains at the forefront of metal exporting countries. There is an effort being mounted to increase our mineral reserves in order to maintain that position, but that has to be matched by modernizing smelters, refineries and other capital investment in plant and equipment.

Cominco’s facilities at Trail are currently among the most modern in the world. Even so, the plant is a relatively high cost producer because it is far from world markets and sources of concentrate.

Canada has always had an abundance of hydroelectric power and that has given our basic industries an important edge over foreign competition. Most provincial governments recognize this.

Unfortunately this isn’t true in British Columbia where the Social Credit government has imposed what could only be described as an onerous tax on water used by industries such as Cominco.

After the modernization of its zinc smelting and refining operations in the early 1980s, Cominco’s industrial tax load jumped from about $200,000 per year to $9 million. That rate might have been a lot higher if the mining industry hadn’t successfully lobbied against an escalation clause that was included with the new rental fees.

The rate Cominco is paying is close to what it costs to bring in concentrates and ship out finished product from its Trail metallurgical complex. Elimination of the rental fee would enable Cominco to compete with European smelters which are much closer to markets, albeit farther from concentrate suppliers.

With the projected closure of domestic zinc mines by the late 1990s, including the Sullivan at Kimberley, B.C., Cominco will feel the pinch on both sides of the equation. It will then be far from markets and the cost of bringing in concentrates will rise sharply, when domestic sources of feed dry up, eroding its competitive position even further.

The company will have to compete for 80% of its smelter feed by the end of the decade so there is a lot more at stake here than the creation of 100 permanent jobs. Future employment at Trail will be jeopardized by these rental fees.

But it’s not too late. The Social Credit government should reduce this tax to more realistic levels if it expects key operations such as Cominco’s to maintain their contribution to the provincial and national economy.

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