Why the Mineral Exploration Tax Credit is such a bad idea – by Lindsay Tedds (MACLEAN’S Magazine – September 2, 2015)

http://www.macleans.ca/

With taxpayers worried about government spending, we should demand better than the renewal of a credit that represents a wasteful use of tax revenues

Conservative leader Stephen Harper speaks with Joe Guido, President of Premier Mining Products as he is shown drill bits during a campaign stop in North Bay, Ont., on Wednesday, September 2, 2015. THE CANADIAN PRESS/Adrian Wyld
Conservative leader Stephen Harper speaks with Joe Guido, President of Premier Mining Products as he is shown drill bits during a campaign stop in North Bay, Ont., on Wednesday, September 2, 2015. THE CANADIAN PRESS/Adrian Wyld

As I am sure all of Canada knows (and much of the world), Canada’s much awaited gross domestic production (GDP) numbers came out Tuesday. Everyone, by now, knows the punchline, but buried in those numbers were little gems that I was certain would lead to policy announcements today. And I was right. The first ones out of the gates have been the Conservative Party of Canada (CPC) which announced an extension to and enhancement of the Mineral Exploration Tax Credit.

Before I talk about what that is, let me explain why I expected this. Those GDP numbers released yesterday showed that outlays in mineral exploration fell: 19.6 per cent in the first quarter and a further 33.2 per cent in the second quarter. In fact, outlays on mineral exploration have been falling since hitting a historical peak in the first quarter of 2012; an unsurprising fact since metals and mineral prices have also been falling since hitting a peak in the latter half of 2011. And every time prices and outlays tank, we have a tendency to announce some preferential tax treatment for the sector.

Now the Mineral Exploration Tax Credit is not new, nor is it a CPC idea. The tax credit actually dates back to 2000, under the then governing Liberal party. At that time, it was called the Investment Tax Credit for Exploration (ITCE) and was intended to be a temporary measure, expiring in 2003. The impetus for the ITCE was low metal and mineral prices which, unsurprisingly, caused a significant contraction in exploration.

Despite metal and mineral prices rebounding by the time the ITCE was set to expire, it continued to be renewed for one-year periods. When the CPC party took power in 2006, they rebranded this tax credit the Mineral Exploration Tax Credit, but continued the trend of announcing sunset dates, and then extending it as that sunset date approached, most likely under lobbying pressure from the mining industry.

Harper himself just this morning announced that the METC would be extended for yet another three years and the tax credit would be further enhanced, from 15 per cent to 25 per cent, for projects in remote areas. And this is despite mounting evidence that shows the tax credit only serves as a tax planning tool for wealthy investors.

For the rest of this article, click here: http://www.macleans.ca/economy/economicanalysis/why-the-mineral-exploration-tax-credit-is-such-a-bad-idea/

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