EDITORIAL PAGE — Mild relief for juniors

It took the Prospectors and Developers Association of Canada one and one-half years of quiet, behind-the-scenes diplomacy and just plain jawboning, but the effort was worth it. The Ontario government, in its late-spring budget, acknowledged that junior mining companies in the province might have been paying more in capital taxes than was required.

This admission means junior mining companies and exploration outfits might be in line for refunds because of overpayments stretching back to 1986. We’re not talking big-dollar windfalls, but surely, for the juniors, it will feel mighty good to claw back refunds from the tax department.

In a nutshell, the capital tax requires a company to pay an annual tax of 0.3% of its “taxable capital,” which includes share capital issued by the company. Thus, a company whose balance sheet shows issued share capital of $10 million can expect to pay $30,000 annually in capital tax. (For more details, see our report on page 16.)

However, companies that explored for minerals in Canada were exempted from the tax, that is, the share-capital portion issued to fund exploration. The snag, from the industry’s perspective, was that flow-through shares were not eligible for the exemption. The budget righted this oversight. To collect, juniors must now review their capital tax payments back to the 1985 taxation year and get in touch with the provincial tax people. For a few of the companies owed money, it might raise interesting possibilities. For example, more than a few companies have been recently de-listed from the Toronto Stock Exchange for failing to comply with TSE regulations governing listed companies. Is it possible that a few were booted off for being under-funded? If so, is it possible that working capital positions were depleted precisely because of the capital-tax overpayments? Admittedly, it’s a long shot and we offer it somewhat tongue-in-cheek. But, if a junior could legitimately argue the case, why not?