Newfoundland doubles tax on claims

Newfoundland has doubled its tax on mineral holdings to encourage exploration on land not being worked. Beginning this month, the province is charging groundholders an impost of $6 per hectare, up from the $3-per-hectare rate which had been in place since 1982.

“There are two things it will do,” says Jim Hinchey, a geologist with the provincial department of mines and energy. “It will either make you work your property or give it up. That’s the whole point.”

The impost rate will increase by one dollar a year until 1996. After that, the levy will stand at $12.50 per hectare until new legislation is introduced to change the rate again.

The levy only applies to landholders who aren’t spending any money on their properties. Work done on a property can be credited against the impost levy. Exploration companies can cover off the cost of the tax by filing a report on their expenditures with the province. And a new provision added to the Mineral Holdings Act in December will enable firms to carry forward the difference of their expenditures over their assessed tax rate in any one year for a 5-year period. Previously the carry-over period was two years.

Carl Legrow, a tax auditor with the provincial department of finance, said the idea of the impost is to prevent people from tying up large blocks of land and not spending any money on it. “If there was no charge, there are some people who would have half the island.”

That was the case, Hinchey said, before the province originally introduced the tax in 1977. Before that, most of Newfoundland was carved up into long-term leases held by a handful of companies. Mineral exploration was almost non-existent compared to other provinces.

After the tax was introduced, companies started returning land to the Crown rather than pay impost on it. That freed a lot of land for exploration companies eager to stake their own ground and hunt for minerals.

Hinchey says the new increase was “quite a jump” over one year, and that it surprised some groundholders by getting legislative approval so quickly, but it shouldn’t cause any of them hardship, he says.

“There are few companies that are going to be dropping some land, but most people are going to be able to keep their holdings.”

The geologist said he expects to see ground opening up in a couple of years’ time as the impost climbs to $9-10 per hectare.

“I think you’ll probably see a few people cutting off the moose pasture on their land and keeping the heart of the ground. It will probably open ground for outside people to come in and start doing some exploration . . . And the more the merrier with the way things are going in the mineral exploration industry.”

Finance department officials wouldn’t say how much revenue they expect the province will get as a result of the tax increase.