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MONTREAL — Most observers are describing Quebec’s new regime on mining royalties as a retreat from the election promises made last year by the Parti Québécois.
But while the damage isn’t as bad as first feared, the new policy adds up to a missed opportunity. At a time when mining investment is slowing down because of tumbling metal prices and weak interest from the financial community, mining operators need a boost from the Quebec government, not a hand reaching into their pockets.
Industry officials are disappointed that the new policy fails to take stock of the uncertain economic context facing the mining business.
“The cost of doing business is constantly increasing and adding another layer of taxation is certainly not the best policy,” said Michel Rathier, a consultant at KPMG Secor.
During the election campaign, the PQ promised to double the royalties on mining operations, arguing that companies were getting too sweet a deal compared with other jurisdictions around the world.
The party proposed a five-per-cent royalty on the value of production from each mine, whether it made or lost money, and a 30-per-cent “supertax” on profits above eight per cent.
That proposal met stiff opposition, so the government has backtracked. Under the new plan, companies will pay either a tax on profit or a tax on production — whichever is greater.
The tax on the value of production would be one per cent on the first $80 million of ore extracted, rising to four per cent after that. The tax on profit would remain at 16 per cent on profit margins up to 35 per cent and then begin to rise above that level.
But even with the PQ’s retreat, the new regime would be more punitive than the current one. And there’s a fair bit of uncertainty surrounding the minority government’s plan, which is not scheduled to take effect until Dec. 31.
First, there’s the matter of legislative detail. How will the new policy be translated into law?
Second, there’s the question of whether opposition parties will support the bill or demand changes.
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