Editorial: Federal budget good for Canada’s miners, explorers (May 15, 2006)

The first federal budget presented by Canada’s new Conservative minority government in early May provided a bevy of long-overdue personal and corporate tax cuts totalling $26 billion over two years, even as overall annual spending increased to $213 billion.

Canadian Prime Minister Stephen Harper and his Finance Minister Jim Flaherty unveiled a budget document that was hardly small “c” conservative in its spending largesse. But they did stay true to the conservative value of personal responsibility by subtly shifting almost all the tax cuts and credits to individuals, rather than larger entities. Students and apprentices got tax breaks while schools didn’t; bus riders will be getting new tax credits while mass transit services won’t; new baby bonuses will go directly to all parents rather than institutional babysitting centres, and the list goes on.

It’s a great start for the Tories, and a welcome relief to see adults in charge again at the federal level after 13 years of Liberal corruption and mismanagement.

Canada’s mineral explorers found plenty to like in the budget, too, especially the extension of the wildly successful Investment Tax Credit for Exploration (ITCE) — commonly known as the “super flow-through” share program — from May 2, 2006, to March 31, 2007. This 6-year-old program allows investors a 15% credit on their flow-through-share investments in grassroots exploration in Canada.

The 1-year “look-back” rule will allow funds raised with the benefit of the credit in 2007, for example, to be spent on eligible exploration activity up to the end of 2008.

The program has contributed to Canada leading all nations in recent years in dollars spent on mineral exploration, and has economically helped out many of Canada’s remote communities which are so heavily dependent on healthy resource-extraction industries.

The Prospectors and Developers Association of Canada reckons that the net fiscal cost to the government of the ITCE extension will be about $65 million over the next two fiscal years, and says the program has already generated $1.4 billion in exploration spending in Canada.

Canada’s capital-intensive mining companies are especially liking the elimination of the hated, job-killing federal capital tax as of Jan. 1, 2006, or two years ahead of schedule.

Miners are also welcoming the elimination of the corporate surtax by Jan. 1, 2008, and the reduction in the corporate income tax rate by 1 per cent to 19 per cent by 2010.

There was some griping, however, by the Mining Association of Canada that the budget failed to spend more money in the geosciences, particularly in northern Canada, by supporting the Cooperative Geological Mapping Strategy. The MAC says it will continue to lobby the federal government to re-invest its tax windfalls in minerals research and mapping.

More downstream members of the diamond and precious metals industry celebrated the long-awaited elimination of the excise tax on jewelry, which had been for so long unfairly hurting domestic jewelry makers and retailers, many of which are small businesses.

Shareholders in public Canadian companies, too, caught a break with the elimination of the double taxation of large corporation dividends, and can be heartened to know that government will be putting renewed effort into creating a single, national securities regulator.

For those in the mining community who’ve made great gobs of money in the stock market and are thinking about their legacy, the budget encourages charitable giving by eliminating capital-gains taxes on securities donated to charities. Teck Cominco and its partners responded the day after the budget with a much-appreciated $7.5-million donation to the University of British Columbia’s mining-engineering program.

Canada’s mining industry is booming, creating new high-paying jobs, boosting our international trade balance and filling government coffers. This most-welcome tax-cutting federal budget will help that boom last a bit longer.