Current Trends In The Tax Environment For Mineral Development In Canada

The purpose of this paper is to tell a story - and it is a story with a moral. My topic is Present Trends in the Tax Environment Affecting Mineral Development in Canada, and the first thing to recognize is that, with depressed metal prices and weakening western economies, taxes, in and of themselves, are not really the cause of the Canadian mining industry's present doldrums. But the character and level of mining taxes in Canada has had a profound influence on the development of the industry over the past decade, and the expectations of what taxes the industry will face in future years will influence the industry's further growth. My theme today is that, in Canada, our tax system has, in the past, served as a negative and destabilizing influence in the mining industry: it has contributed to a major short-fall in investment commitments and hence in the contribution which the mining industry can make to the Canadian economy, and the adverse effect on the industry of previous high tax rates was made far worse by the confusing, contradictory and perverse nature of the tax system itself. This is a story with some happy parts in it, and, in fact, governments in Canada did learn, haltingly and grudgingly, that there are limits on the amounts that governments could safely extract from the industry, and that some assurances of long term fiscal stability were necessary if investors were to be induced to make massive commitments which could only be recovered over very lengthy periods.