It takes chutzpah for Potash to protest new tax regime – by Sean Silcoff (Globe and Mail – March 20, 2015)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

Saskatchewan is blessed with the world’s largest bounty of potash – and cursed with the worst tax system for capitalizing on its bounty of the naturally-occurring fertilizer. It is a regime so complex that nobody – miners, investors or governments – has a clue how to forecast the tax outlay from year to year. Even University of Calgary tax expert Jack Mintz, who has written extensively about it, calls the regime “the most complicated thing I’ve seen in my whole career.”

Finally, after much prodding, the government of Brad Wall is promising to do something. In the provincial budget tabled this week, the Premier promised “a broad review of the entire potash tax regime.” Change can’t come soon enough. Potash Corp. of Saskatchewan, the industry’s largest miner, isn’t happy, but it has a lot of nerve to complain.

Saskatchewan’s potash tax system, according to a recent paper co-written by Dr Mintz, is convoluted, inefficient and uncompetitive. There are three levels of levies, creating a “tax jungle” that leaves producers subject to marginal effective tax and royalty rates last year ranging from 0.3 per cent to 22.6 per cent. It’s a wild and ridiculous range, especially considering the rate in other potash-producing countries amounts to one number, usually in the mid-teens or low 20s.

Worse, since the government allows miners overgenerous writeoffs from capital spending , the province incurred potash production tax losses in 2010, 2012 and 2013 and eked out only $10-million in such revenue in 2011 – at a time when production and commodity prices were rising. (by comparison, the government’s production tax take averaged almost $120 million from 2004 to 2007 and reached $749-million in 2008).

In addition to foregone tax revenues, the allowances distort the economy by encouraging overinvestment in potash mines, which could create overcapacity, spark local inflation and draw investment dollars from other areas.

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