Mining taxation and global decision making

"The last edition of Tax Notes expressed concern about two proposed tax changes in Finance Minister Paul Martin's 1995 budget that could have detrimental effects on Canada's mining industry. This month, Tax Notes expands on these concerns. This article is based on a paper that the author presented at ClM '95 in HalifaxIntroductionOn a global basis, there are more investment opportunities in the mining industry today than at any other time in history. Countries in Central and South America, Eastern Europe, the CIS, Central Asia, and Asia are competing aggressively to attract investment to all sectors of their domestic mining industries. Today, the demand for investment dollars exceeds the amount of dollars that are available for investment in mining. It is not surprising, then, that the established mineral producing nations are witnessing a decline in spending on exploration and development on their home turf, and an increase in spending in developing countries. In the context of a developed country such as Canada, there are two manifestations of the problem of declining investment: (I) Foreign investors are allocating more of their capital budgets to new opportunities in developing countries; and (2) Canadian juniors and seniors are spending proportionately more abroad. This shift in global spending patterns is the source of some concern for the future of Canada's mining industry, particularly because it is widely believed that the current rate of discovery of ore reserves in this country is too low to replenish depleting reserves.""Government bashing"" has always been a popular pastime in Canada. Invariably, this pastime has focussed, at !east in part, on taxation. In view of the intense competition that Canada faces on the global mining scene, it is important that the role of taxation in the decision-making process be kept in perspective. This paper seeks to put the role of taxation into perspective."