This article was provided by the Ontario Mining Association (OMA), an organization that was established in 1920 to represent the mining industry of the province.
Several measures announced by Ontario Finance Minister Dwight Duncan in the 2009 provincial Budget yesterday promise tax savings to Ontario mineral producers. Perhaps the most important is the move to a single value added tax by July 1, 2010, which could save the mining sector potentially millions of dollars annually. This federally administered value added tax would have a combined rate of 13% — 8% for Ontario, matching the soon to be phased out retail sales tax, and 5% for Ottawa, matching the current Goods and Services Tax (GST).
The value added tax allows companies to be reimbursed for tax paid on business inputs through tax credits. It is estimated that Ontario´s $10 billion-plus mining sector spends about $3 billion annually on these inputs to production. More than 90% of these production inputs are purchased in Canada and 80% of the province´s mineral output is exported. The arithmetic may be complicated for individual companies and there is a lag in receiving benefits of the tax credits, but the potential for tax saving — freeing more dollars for future investment — is significant.
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