New federal tax hits mining companies

"It is quite likely that more than a handful of junior exploration companies will receive some startling news from their accountants this spring when 1989s tax returns are being prepared. These companies could find that, for the first time ever, they will have to write a cheque to the federal government on account of a new federal capital tax which became effective July I, 1989IntroductionMany mining companies which have never had to pay a federal income tax are finding that they indeed have a tax liability for 1989. Non-producing companies, such as junior exploration companies, almost automatically assume that they don't have to pay any income tax. But, a new tax imposed under the Income Tax Act catches especially the company that has no income.Effective July 1, 1989, a federal capital tax (some call it a corporation minimum tax) is payable by any corporate carrying on business in Canada where the corporation has ""taxable capital"" exceeding $10 million. As a result of the popular use of flow-through shares in recent years, many junior exploration companies are finding that their balance sheets show capital stock over $10 million, and that they are consequently caught by the new tax. Further, some of these companies are finding, to their chagrin, that the tax for 1989 was due on February 28, 1990, and that non-deductible interest is ticking away on unpaid taxes."