B.C. mining companies face new profit-based tax

The new tax system consolidates four existing statutes and is based on recommendations given to Premier Vander Zalm and Mines Minister Jack Davis by the Mining Industry Task Force in February 1987.

Davis said individual mines will be assessed tax on their net revenues after deducting all operating and capital expenditures and allowing for a competitive return on investment.

“However, we have also moved to establish a minimum tax based on each mine’s net current proceeds,” Davis said. “This means that every operating mine with positive net operating cash-flow will pay some tax every year.”

For metal mines, the new system is a major overhaul and simplification of the current Mineral Resource Tax, with the tax base broadened and the rates lowered. Money spent on reclamation is also given fairer treatment under the new scheme.

The start-up date is planned for April 1, 1990, and the new tax is expected by the government to be revenue-neutral in its impact on the industry.

For coal, the major feature is the elimination of the coal royalty which Davis said was seriously affecting the viability of some of the province’s coal operations, especially in the southeast.

“The new profits-based system will end this discrimination and allow these mines to continue in operation and make new investments in modernization,” the mines minister said, adding that he expects the coal tax will be revenue- neutral in the medium term.

“I’m looking for coal prices to recover in the next few years,” said Davis. “These will give industry improved revenues and give the Province higher tax returns.”

Tom Waterland, president of the B.C. Mining Association, said the Association’s Tax Committee is doing a mine-by-mine analysis of the new tax system to determine what its overall effect will be. The Coal Association will be doing a study to determine how the changes will affect coal mines.

“In general terms we consider the removal of the coal royalty a very positive step,” said Waterland, “but we do argue that tax levels are still on the high side.”

Specifically, Waterland said the first tier tax on metal mines might have a negative impact on investment in new mining ventures as it will require mines, particularly new ones, to pay tax at a much earlier time than before.

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