But the retention of the flow- through program and the continuance of Canadian Exploration Incentive Program (CEIP) grants may be the only good news for the industry in Michael Wilson’s budget.
In their release entitled Searching for the silver lining, analysts Barry Dent and John Playfair write that the budget contains “major revenue raising initiatives that will clearly add to the cost structure of the resource industry.”
The budget calls for a “large corporations capital tax,” effective July 1, 1989, that will tax defined taxable income employed in Canada in excess of $10 million at a rate of 0.175%. “This tax could comprise a significant addition to the cost structure of resource corporations, which are characterized by high capital requirements, long lead times in the development stage and cyclical product prices,” the analysts write.
They also warn that proposed changes to the unemployment insurance program may also increase costs.
Capital gains exemption and the 100% write off for Canadian exploration expenses have been retained and will continue to benefit the mining industry.
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