Government Policy And The Potash Industry In Saskatchewan ? Introduction

The potash industry in Saskatchewan has recently been the focus of much new legislation at the provincial level and, along with other mining industries in Canada, also subject to changes in tax legislation at the federal level. As a result, the industry presently operates under (a) provincial production controls, a prorationing scheme; (b) a new provincial reserve tax on potash only and; (c) a new federal income tax applicable to all mineral industries. The prorating scheme dates back to 1970 and emerged as public policy because of the excess supply situation faced by the international potash industry towards the end of the sixties. This caused special problems for new mines in Saskatchewan and the provincial government decided to intervene. The new tax legislation at provincial and federal levels, both introduced within the last four years, reflects a belief that insufficient revenues accrue to the public sector from natural resources. All mining industries in Canada, including the potash industry, have had their tax positions completely reversed during these four years. Traditionally the mining sector in Canada has been a recipient of substantial tax incentives and has enjoyed low tax rates. This has changed and the mining sector is now one of the most heavily taxed sectors in the economy. In addition, the mining sector has moved from a situation where its rapid development was favoured by governments to a situation where this is no longer the case.