Taxation as a source of financing

"While it might seem like heresy to suggest that ""taxation"" can be a source of financing, never the less some generous tax rules can considerably enhance the tax savings pertaining to a particular expenditure or project. A basic tax knowledge, and careful tax planning, can optimize government participation in a project. INTRODUCTIONIn trying to identify sources of financing for a project, ""government"" as a source of funding is normally thought of in terms of government grants, loan guarantees, interest rate buy downs, property tax waivers, hydro subsidies, and so on. Generally, such concessions are somewhat difficult to obtain, especially in the current period of apparent fiscal restraint. One source of government funding which should not be overlooked is the income tax regime, and, at the provincial level, the various provincial mining tax regimes.While the taxpayer would not normally view a tax system as a potential source of government financing, nevertheless various federal and provincial rules applicable to the mining industry can offer attractive tax deductions - and tax savings - with respect to particular expenditures. In fact, it is not unusual for a civil servant to refer to a tax deduction as a tax ""subsidy"". For example, in the right circumstances, the cost of a smelter expansion in New Brunswick would cost the operator only 31 cents on the dollar, with the federal and provincial governments paying for the other 69 cents by foregoing tax revenues (Table I). In a sense, such tax savings could be compared to a government grant equal to 69% of project costs. Of course, not every project expenditure will generate that degree of government funding. The fact of the matter is that the percentages of tax savings attached to different expenditures cover a wide range, depending on a complex mix of factors. The point to understand is that the tax rules can offer some valuable savings, even after tax reform, and that a basic knowledge of the tax rules can yield some fruitful rewards."