The Yukon mineral exploration tax credit has been cancelled.
This is a good decision on the part of the Yukon government.
But it comes about two years too late.
The tax credit allowed exploration companies to be reimbursed 25 per cent of the expenses they incurred looking for minerals in the territory. There was no cap on the rebate.
As such, it was essentially a massive handoff to exploration companies padding around the territory.
How big was it?
Well, consider this: In 2000, the Yukon government made $8.3 million in corporate taxes.
In ’05-’06, the territory netted just $2 million.
“The credit’s a large part (of the loss), there’s no doubt about that,” said assistant deputy minister of Finance David Hrycan.
So, here’s the rub: the territory collected sizable taxes from established Yukon businesses and then passed damn close to all that money to junior mining companies based in Vancouver.
The government will argue that it was done to bolster mineral exploration.
And mineral exploration has gone up — last year it stood at $53 million, up from $13.2 million in 1999.
But it’s hard to pin the cause on the territory’s abnormally huge mining grant.
The exploration boom wasn’t unexpected. The government has been trumpeting it for a couple of years now.
And it would have happened with or without the government subsidy.
With China’s white-hot economy pushing demand for minerals, prices have shot up, encouraging exploration companies to look to the frontier for new deposits.
They would have come to the Yukon without the government’s desperation-sized subsidy.
But, despite knowing exploration was set to skyrocket, the government failed to retool the grant program.
Instead, Finance Minister Dennis Fentie and Mines Minister Archie Lang let it leech millions from the treasury.
In fact, despite making the decision to end the subsidy, Lang wimped out at the government’s Cordilleran Roundup soiree.
Rather than telling them the news straight, he spun the executives drinking the Yukon’s booze.
The Yukon would be “exploring tax incentives offered in other provinces and examining potential improvements to our own tax and royalty regime.”
There was no mention of the exploration grant being finished.
Ending that grant is the right decision.
It’s just too bad that it was allowed to drain so much public money before it ended.
It is time industry started mining the soil rather than the government.
And so, in rebuilding the tax and royalty regime, we encourage the government to abandon handouts and adopt a more balanced approach to the mining industry. (RM)