A comparative analysis of income based taxes on mining (Considerations underlying review of The NWT Mining Royalty Regime)

"Income based taxes are significant cost elements to be considered in evaluating investment in new mine development. This paper presents the results of comparative analysis of effective income-based tax rates for mining in the Northwest Territories (NWT), selected Canadian provinces and international jurisdictions. The study was done as background to a review of royalty regulations for the NWT. ObjectiveThis paper presents results of comparative analysis of effective mining royalty1 rates, and combined effective mining royalty and income tax rates on selected mine models for the Northwest Territories (NWT), with those for several other jurisdictions in Canada and abroad which compete with the NWT for mining investment.BackgroundThe February 27, 1995 federal budget directed the Department of Indian Affairs and Northern Development (DIAND) to proceed with a comprehensive review and amendments to northern natural resource management legislation in order “to increase revenues and ensure a fair return to the Crown.” DIAND is responsible for the administration of the Territorial Lands Act, and its regulations.The Territorial Lands Act gives the Governor-in-Council the authority to “… make regulations for the leasing of mining rights in, under or on territorial lands and the payment of royalties therefor,…”. In the NWT, the Canada Mining Regulations (CMR) provide for the disposition of mineral rights for most minerals, other than coal, petroleum and related hydrocarbons, in return for the payment of a royalty to the Crown.As part of this review of the NWT mining royalty regime, several computer mine models were developed and tax regimes in a number of jurisdictions were analyzed. Effective mining royalty rates, and the combined effective mining royalty and income tax rates were compared across the jurisdictions. The results presented in this paper are a part of the background work done in preparing a discussion paper on proposed changes to the NWT mining royalty that is expected to be released for public consultation in the very near future."