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Saskatchewan is preparing to review its byzantine potash royalty regime, and Premier Brad Wall thinks it is long overdue.
“Without the incentives that are overlaid on top of the royalty structure for brownfield and greenfield investment, we have the highest potash taxes on earth,” he said in an interview. “Higher than Russia.”
But in this week’s budget, Mr. Wall introduced one interim tax change that has already drawn a furious response from the world’s biggest fertilizer company.
Saskatchewan is stretching out the timing in which miners make deductions for expansions and maintenance spending. That has a significant impact on Potash Corp. of Saskatchewan Inc., which is wrapping up a $6-billion expansion program in the province. Potash Corp. expects budget proposals will cut its pre-tax earnings by $75-million to $100-million this year.
“Changing the rules midstream impacts the ability of our shareholders to earn a fair return on their capital and undermines Saskatchewan’s relative competitiveness,” chief executive Jochen Tilk said in an uncharacteristically harsh statement.
In response, Mr. Wall noted that potash companies have benefited from the province’s generous capital spending incentives for many years. But he also extended an olive branch to the industry with his promise to address high potash taxes as part of the government’s review of the royalty regime.
Many people felt this review is overdue. Academic Jack Mintz of the University of Calgary has been a frequent critic of the royalty structure, saying it is too convoluted and benefits absolutely no one. It involves a number of different levies and is heavily weighted towards price as opposed to volume.
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