Flow-through • Issues & Advocacy
Excerpt from a letter from Natural Resources Canada
Minister Ralph Goodale to the PDAC, dated October 18, 2000:
"I am
writing about some good news from the Government of Canada, for
the Canadian mineral exploration industry.
The industry is
struggling with a serious situation brought on by various
factors - including low metal prices and stiff competition for
risk capital against the information technology industry - which
have converged to cause a deep downward cycle in the level of
exploration activity.
To help remedy
the situation, the Prospectors and Developers Association of
Canada (PDAC), on behalf of the junior exploration industry in
Canada, has been asking for a national tax-based incentive
program to help make flow-through shares more attractive to
potential investors. At the most recent (September) meeting of
Canadian Mines Ministers, the specific PDAC proposal was given
detailed consideration. While several jurisdictions expressed
reservations about that proposal, all jurisdictions agreed that
an effective solution must be found.
As promised, the
Government of Canada has consulted extensively with industry and
community stakeholders and with provincial and territorial
governments as to the best way of stimulating more exploration
activity and triggering better economic growth and job creation
in resource-dependent rural and northern communities across
Canada.
In his Economic
Statement on October 18, 2000, the Honourable Paul Martin,
Minister of Finance announced a temporary 15-percent income tax
credit that will be available only to individual investors who
incur, either directly or through a partnership, specified
exploration expenses pursuant to a flow-through share agreement.
The specified expenses are grassroots exploration expenses that
are incurred after October 17, 2000, and before 2004 and are
conducted from or above surface which is the type of activity
that has been the hardest hit. Provinces are invited to
complement this new federal exploration tax credit with their
own tax credit at the level they consider appropriate to meet
the specific needs of their industry.
In combination
with the actual 100-percent Canadian exploration expense
deduction, the new tax credit will provide net federal tax
relief of nearly 40 percent of the cost of exploration (for
those taxed at the highest marginal rate). This substantial
level of assistance should help preserve jobs, protect
world-class Canadian expertise in a high-tech activity and
stimulate grassroots exploration that industry needs for mining
community growth across Canada.
Attached
is the exact wording of Minister Martin's "Ways and Means
Motion", together with information that illustrates the
benefits provided by this new federal approach, and a comparison
to the original Focussed Flow-Through Share proposal which was
discussed at the recent Mines Ministers' meeting."
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