CALGARY, Feb. 8, 2013 /CNW/ - A report published today by The School of
Public Policy concludes that Saskatchewan's potash fiscal regime is a
mess and is hurting the province's economy. Authors Jack Mintz and
Duanjie Chen analyze the current regime and find it to be a hodgepodge
of tax and royalty rates.
"Under the current royalty and tax regime for potash producers, the
tangled thicket of royalties, taxes and credits can differ between
commencement dates for production, projects of different sizes, or even
projects of similar size but with different profitability; it also has
potash producers generally enjoying a much lighter tax burden on
marginal investments than that borne by the oil and gas industry and
most other non-resource industries," the authors write. "The result is
distortions and inefficiencies, resulting in subpar investment
activity, which can only stand in the way of Saskatchewan reaching its
full economic potential."
Mintz and Chen argue that revamping the potash fiscal regime should be
done with a focus on "simplicity" and "efficiency."
To achieve these two standards, they propose a "revenue-based royalty
and a rent-based tax, each of which with a single rate and an identical
tax base for all tax/royalty payers." This means that government would
set two rates, one royalty and one tax applied to revenue above the
normal cost of capital, which would be applied across the sector.
Implementing these reforms would create long-term stability in both
government revenue and investment in the sector, Mintz and Chen argue.
The report can be found at www.policyschool.ucalgary.ca/publications
SOURCE: The School of Public Policy - University of Calgary
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