In his recent economic statement, federal Finance Minister Paul Martin announced two measures designed to encourage investment in Canada’s junior exploration companies.
The minister proposed a temporary 15% income-tax credit available to individual investors who incur, either directly or through a partnership, exploration expenses pursuant to a flow-through share agreement.
The expenses must be incurred by a corporation after Oct. 17, 2000, and before Jan. 1, 2004, and must be for grassroots exploration conducted from or above surface.
In combination with the actual 100% Canadian-exploration expense deduction, the new tax credit will provide net federal-tax relief of nearly 40% of the cost of exploration for those taxed at the highest marginal rate of 29%.
The mini-budget also reduced the inclusion rate for the capital-gains tax to 50% from 66%.
The president of the Prospectors and Developers Association of Canada, John Steele, commented that Martin and Natural Resources Minister Ralph Goodale have been “attentive to the PDAC’s representations about the crisis in mine exploration [and] it appears they have responded in a positive and creative manner.”
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