Commentary: OMA weighs in on budget

The Ontario Mining Association recently presented its interpretation of the constructive — and less than constructive — aspects of the 2007 provincial budget to the Ontario Legislature’s Standing Committee on Finance and Economic Affairs. The OMA applauded the reiteration of the commitment in the recent budget to $15 million for geological mapping and geoscience.

Other aspects of the budget the OMA viewed as being beneficial to the mineral producing sector included the Good Samaritan legislation that removes barriers to mining companies in carrying out rehabilitation work on abandoned mine sites on Crown land, and the provision of $7 million to support consultations with First Nations. The OMA also welcomed the planned elimination of the unproductive capital tax and the support for research, which has been provided to the Centre for Excellence in Mineral Innovation, MIRARCO and NORCAT in Sudbury, Ont.

However, the proposal for a 13% diamond royalty holds the potential to erode and undo all the positive outcomes that could result from constructive measures. The proposed diamond royalty would almost triple the mining tax paid by De Beers Canada from its Victor project after the company has built a business case and invested $1 billion into what is Ontario’s first — and at this time only — diamond mine. Production from the Victor mine, near Attawapiskat, is scheduled to begin in 2008.

“Perhaps the true danger of the imposition of the diamond royalty in this manner is that it will serve to add another additional cost on the industry and erode competitiveness internationally,” says Peter McBride, OMA Manager of Communications. “Also, by changing the course of the tax policy in mid-stream, the international reputation of Ontario as a good place to invest enters rougher waters.” He pointed out that the international business media has been vilifying Ontario for this action — “Victor is a relatively small mine and it is Ontario’s only diamond mine, which makes it look like the punitive royalty is being levied on one mine, one company and one community.”

The OMA stressed the point that while offshore investors do not vote in Ontario, how they vote with their dollars affects future employment and entrepreneurial opportunities for Ontarians. The OMA believes that Ontario is not getting its share of new investment during the current global commodity boom. British Columbia has 25 mining projects in the development pipeline with a value of more than $6 billion. Also, Canadian mining companies are involved in numerous projects in Africa, and by 2010, the value of these projects is estimated at $14 billion.

The corporate taxes paid by mining companies are only the tip of the iceberg in the government revenues mining generates. For every high paying mining job in Ontario, there are three service sector jobs created, leading to huge spinoffs of personal income taxes, retail and other taxes.

While Ontario has worked extremely hard over the years to develop a competitive tax regime for mining, the royalty proposal appears to be a backward step. The government needs to do more to give greater consideration to the impact its actions will have on the economics of the sector and the wealth and community development mining brings for all Ontarians.

— The preceding is from an information bulletin published by the Toronto-based Ontario Mining Association.