Saskatchewan tax-rule changes could cost PotashCorp up to C$100m this year
19th March 2015 By: Henry Lazenby
miningweekly.com
TORONTO (miningweekly.com) – The world's largest potash producer Potash Corporation of Saskatchewan ( PotashCorp) says changes to potash taxation are expected to shave between C$75-million and C$100-million off the company’s 2015 pre-tax earnings.
In his 2015/16 budget speech, on Wednesday, Saskatchewan Finance Minister Ken Krawetz announced changes to the province's Potash Production Tax, stating that potash mining companies would be required to take tax deductions based on their capital spending over a longer period of time. This was expected to boost the province's revenue by C$150-million.
This would be an interim measure, while the province undertakes a review of the potash taxation and royalty regime.
PotashCorp noted that the impact of these changes would be most pronounced in 2015 – and to a lesser extent in 2016 – as the company wound down its capital expansion projects and incurred higher maintenance capital spending as a result of the expansions.
" PotashCorp is disappointed in the announcement. While we understand the difficult revenue situation facing the government, we are nearing completion of a $6-billion investment in Saskatchewan, which was based on the existing tax structure remaining in place. Changing the rules midstream impacts the ability of our shareholders to earn a fair return on their capital and undermines Saskatchewan's relative competitiveness,” president and CEO Jochen Tilk said.
He noted that a stable, predictable and fair potash taxation system was critical for both the province and the industry.
"We are focused on ensuring that any changes to the existing system continue providing benefits to the people of Saskatchewan, while also protecting the competitiveness of the industry and the long-term interests of our investors, employees and customers. A constructive and consultative review process is an important part of ensuring such an outcome and it is our hope that the government will pursue this avenue,” he held.
A recent report by the Royal Bank of Canada highlighted that low oil prices would take their toll on the Saskatchewan economy in 2015, but that potash and agriculture would, however, help boost the province's economic growth by more than 2% this year and in 2016. |
