Facts & Figures — Saskatchewan property assessment to be updated

Assessment and tax policy for Saskatchewan will soon receive its first major overhaul in 30 years.

Earlier this month, the provincial government released a report on proposed changes to the property assessment scheme, along with a discussion paper on a new tax policy.

The implications for the mining industry can be summarized as follows.

With respect to mines, pipelines, and the oil and gas industry, the government report admits that the present legislation is neither clear nor consistent in defining what is assessable and what is not.

The report also observes that since the general trend in other provinces is away from assessing equipment (that is, equipment that does not serve the purpose of servicing a structure), similar rules should apply in Saskatchewan. This is already the case in most industries in the province.

In order to increase competitiveness with other provinces and treat taxpayers in Saskatchewan more fairly, the report recommends assessing mine equipment used for extraction and primary production, but not equipment used for processing or refining.

Likewise, assessable pipeline property would include the line of pipe, but not machinery along the pipeline. Oil and gas well machinery within 20 metres of the well head that is used for production or enhanced recovery would be assessable.

Land, buildings and structures would remain assessable for all types of property, but with some changes in the method of valuation. The main change involves decreasing the assessment where there is evidence of a decrease in market value. The current recommendation is that allowable evidence might include such things as prolonged non-use of a building, a selling price below cost, or reduced use of a pipeline. But until 1998 or later, the Saskatchewan Assessment Management Agency (SAMA) is not prepared to consider any sort of income analysis to measure loss in value. At a meeting in Saskatoon in October, Biran Hebb, chief executive officer of SAMA, indicated the reasons were twofold: lack of data and software, and a lack of staff trained in income analyses.

In summary, such factors as chronic vacancy or reduced use due to functional obsolescence or economic factors, will reduce taxes under the new scheme — provided the evidence is in the restricted form acceptable under the proposed statutory and regulatory changes.

— Mr. Thair is a property appraiser and lawyer, and Ms. Bloemraad is a lawyer and translator for international mining contracts. Both are with Thair Law Offices in Saskatoon, Sask.