Such creation of wealth and untold economic benefits for all Canadians is solid proof of the value of flow-through financing. What is disturbing, is a PDAC report that found the amount of flow-through dollars raised this year off by almost 75%.
Although low gold prices and lack of investor confidence in junior mining shares are partly responsible for flow-through’s demise in 1989, they are just part of the problem. Confusion over the new flow-through regulations and the negative effect of certain tax rules pertaining to flow-through shares have also hurt.
To the PDAC’s credit, they are attacking these problems with a 2-part program designed to educate investors about the merits of such investments thereby boosting investor confidence. Also, the PDAC is proposing three amendments to the income tax act which would provide more favorable terms to flow-through investors and prospectors.
Probably the most onerous change introduced by the tax mandarins in Ottawa is the cumulative net investment loss (CNIL) rule. Not only is its interpretation confusing to all but a chartered accountant, the CNIL rules reduce the return available to flow- through investors. The PDAC rightly asks that this rule be repealed.
With respect to prospectors, why not treat them in the same manner as farmers and other small businessmen? All these groups are in relatively high risk enterprises. “Prospectors who forego the security of wage-earning to risk their time and capital resources to seek new orebodies deserve a capital gains benefit,” the PDAC argues.
Flow-through, which was used to enrich every Canadian, is hurting badly. Not only are thousands of men and women unemployed, but much-needed mineral exploration, required to replenish depleting reserves of copper, zinc, nickel and lead, is waning.
By implementing some of the changes proposed by the PDAC, Canadians of all walks of life stand to gain. It’s not just logical, it’s good business.
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