Editorial Tax reform will not be delayed

It seems the suspense over Federal Finance Minister Michael Wilson’s tax reform proposals and whether or not he will make changes in flow-through share financing will not be too prolonged after all.

Rumor had it, not too long ago, that other legislative priorities might push back delivery of Mr Wilson’s tax reform package well into the fall. Just the other day, though, the finance minister insisted he would have a white paper on tax reform out “before the end of spring,” or before June 21.

Meantime the mood in the mining community remains a little uneasy about the possibilities of either an outright killing, or at least some curtailment, of the flow-through concept — a concept that has proven of incalculable value to the mining industry in Canada, and has been rightly described as “the engine driving the Canadian mining sector.” That’s not a particularly overstated phrase, measured against the likelihood that this year more than $750 million is expected to be raised with flow-through financings. That compares with more than $500 million last year and just $34 million four years ago, when the mineral exploration depletion allowance was first introduced.

When, following the recent annual meeting of Noranda Inc., he was asked for a comment on Mr Wilson’s possible treatment of flow-through, Chairman Alfred Powis raised a hand with fingers crossed. We would just have to hope for the best was the indication. He did however confess to a sense of concern about the fate of flow-through even though, as he said, it was certain that Mr Wilson had been well briefed by such bodies as the Prospectors and Developers Association of Canada and the Mining Association of Canada regarding the risks to the industry of any cuts or curtailment in flow-through financing.

Many others in the industry probably share Mr Powis’ concern. The managing director of the Mining Association of Canada, George Miller, however, has taken some heart from the March announcement that oil and gas companies in Canada will be allowed to sell flow-through shares with tax advantages attached — previously the sole preserve of the mining industry.

Mr Miller sees that as a kind of signal from the Finance Department that flow-through for the mining industry is relatively safe from being tampered with in the upcoming tax reform proposals. Like Mr Powis, we’ll just have to wait and see.