Uncertainty surrounds deduction of environmental costs

"Income tax legislation is not keeping pace with federal and provincial environmental legislation. There is a vast array of new environmental regulations at various stages of implementation across the country. Unfortunately, there are serious concerns about the deductibility of significant payments which mining companies will be required to make under these new rules, and the Department of Finance seems to be reluctant to act on these concerns. IntroductionWhile the federal and provincial governments are racing ahead with obvious fervour to introduce new envirorunental laws, the tax rules relating to envirorunental costs are being allowed to lag far behind. In a nutshell, the tax treatment of envirorunental costs is not keeping pace with the new envirorunental legislation.One of the most serious concerns of the mining industry is the deductibility of mine reclamation or closing costs. The producing provinces are well advanced down the road toward mandating upfront deposits, bonds, or similar financial guarantees to protect the envirorunent from the operation and eventual closure of a mine. These requirements are not small. In some instances, they can amount to tens of millions of dollars. And, if there is no tax deduction for these sums when they are set aside by the mining company, then the costs have to be paid out of the company's after-tax earnings."