Risks to mining in tax reform

Just a few days ago, the Mining Association of Canada met with Fin ance Minister Michael Wilson to set out the mining industry’s views and concerns regarding tax reform in this country, and its possible impact on the industry.

The industry was one of the first of about 30 such business groups across Canada invited to inform Mr Wilson on what is important to each group in the whole area of tax reform, a blueprint for which is likely to be tabled in the minister’s spring budget next year.

Tax reform is coming, there is little doubt about that. It’s also apparent that the mining industry, already suffering from a prolonged period of ebbing fortunes, could be severely hurt by changes in the present tax system.

There is particular concern, for instance, over the flow-through financing rules for mineral exploration, which has proved of inca lculable importance since it was initiated in 1983. It has almost literally kept the industry alive.

There is also some concern over the fate of the resource allowance for the operating side of the industry, described by George Miller, executive director of the Mining Association of Canada as a quiet little thing, which has sat there year after year,” but which he says could be in s ome danger of reduction or change in any new tax system.

These two items alone, flow-through and resource allowance, are absolutely essential to the future health of the industry, and the necessity for preserving both was forcefully argued by the MAC before Mr Wilson, as were other tax advantages currently enjoyed by the industry.

In fact, both Mr Miller and MAC President Walter Curlook, expressed optimism about the outcome of the Association’s presentations to Mr Wilson, even though at this stage there can be no guarantees.

I’m very positive that we, (the industry), have established a lot of credibility with Mr Wilson,” Mr Miller says. He’s a straight shooter, and we are comfortable with him. We haven’t been throwing up any smokescreens, either.” We’d go along with the association executive’s belief that Mr Wilson and his ministry deserve a pat on the back for establishing the ongoing consultative process with industry groups over tax reform.

Nevertheless there is almost certainly no way in which Mr Wilson and his colleagues can accommodate all of the special interests it has heard and will hear when it gets right down to the nitty gritty next spring.

As much as all signs might point to the retention of the flow-through share financing concept for instance, (elimination of it is an unthinkable proposition to the mining industry itself), there should be no let up on the part of the industry in persuading Ottawa to leave it alone.