EDITORIAL Reactivating exploration in Quebec

When Quebec’s new budget is tabled this spring, there could be some good news for the province’s junior mining companies. Recent meetings between the Quebec Prospectors Association and provincial civil servants have led to speculation that Quebec may increase the provincial tax deduction from flow-through shares. At the moment, in Quebec, an investor in flow-through shares is able to deduct 100% of the cost of flow-through shares from taxable income for federal tax purposes and 133% for provincial tax purposes. The provincial deduction could be increased, perhaps to as much as 200%.

There are also indications that the province could adjust the cost base for calculating provincial capital gains tax on flow-through shares. Flow-through shares are currently deemed to have a cost of zero when calculating capital gains. Modifications would see the shares’ cost be increased to an after-tax value resulting in a smaller capital gains bite.

Measures of this kind would help boost investment in Quebec exploration to its goal of $100 million annually from 1990’s $45 million.

But no one, except perhaps provincial Finance Minister Gerard Levesque, knows what measures the budget will hold. Certainly after the recent federal budget reduced transfers to the provinces there is an immediate need for the province to maximize revenues. That could work against efforts to reactivate mineral exploration in the province through tax measures.

Quebec, however, seems more aware of the contribution mining makes to the provincial and national economies than the rest of the country. When Mines Minister Lise Bacon spoke at the Prospectors and Developers Association of Canada’s annual convention in Toronto recently, she referred to a study that showed a net payback for the province when it comes to assisting mineral exploration.

A $10-million investment in Quebec’s mining sector generates 177 jobs and an annual payroll of $5.7 million. For other sectors of the economy, a $10-million investment generates, on average, only 155 jobs and an annual payroll of $2.8 million — less than half of what the same investment generates in mining.

The industry needs more of such numbers to get its message across to finance ministers in Quebec and other jurisdictions that the industry is hurting, that assistance doesn’t have to be in the form of handouts, and that fiscal measures to encourage investment will result in a net benefit to the government.

Reasonable tax measures that help the mineral exploration do not have to be a drain on the public purse. They can simply be an effective way of helping the overall economy by encouraging investment in the nation’s mineral resources.