Two rather wrong-headed moves in Venezuela and Australia have left Canadian mines looking like more profitable choice for global investors.
Last week, word circulated that Venezuelan president Hugo Chavez is studying plans to nationalize that country’s gold mines. He says he must not allow foreign “capitalist mafia” to continue damaging the environment and violating workers’ rights. That’s high-sounding rhetoric, but Chavez has his mind made up, I’m sure. He has already nationalized the steel, oil, cement, power and telecom sectors in that country.
The Australian mining industry was stunned and irate last week when at the news that their government is overhauling the resource tax regime in a move that will cost them dearly. “Disappointing” and “regrettable” are two of the milder responses to the announcement. The new plan will result in a 40% tax on profits on top of the corporate tax rate which would be reduced to 28% from 30%. It will be applied to operating mines as well as to new projects. The exploration sector gets a small break in the form of a rebate on exploration expenses.
The upshot of both these moves is that they severely discourage the long-range investments necessary to develop major new producers. Worse yet, there is fear that other countries in Latin America and Africa will adopt windfall profits tax on the mining industry.
Canadian Finance Minister Jim Flaherty reacted to the Australian announcement by saying, “If it is what it appears to be, a significant tax increase, that’s another competitive advantage for Canada. We’re reducing our corporate taxes.”
Before we pat ourselves too much on the back, we must be reminded of the not one – but two – private bills now before Parliament that could cast our proud industry in a less than favourable light.
We are familiar with Bill C-300 that would make the federal government the overseer of all things environmental and human rights related where Canadian miners are active in foreign lands.
Now, from CAMESE, we learn on C-429 that has already passed second reading and is in committee. It would require that the Minister of Public Works, before soliciting bids for the construction, maintenance or repair of public works, federal immovables and federal real property, give preference to the use of wood. Why anyone would legislate the preferential use of one building material or industry over another is lunacy, in my opinion.
Both C-300 and C-429 are private members bills, and private bills seldom become law. That’s no reason to be complacent. If the mining industry does not make itself heard now, we will find ourselves hobbled by two more needless and potentially expensive regulations.