FOR IMMEDIATE RELEASE

(Ottawa) - The Green Budget Coalition calls on the federal government to reconsider proposed changes to federal tax laws, introduced last week, to reduce taxes for the mining, oil and gas industries. According to Finance Department documents, the changes will cost the federal government $260 million per year in lost revenue. The Coalition states that the changes ignore the long-term negative environmental, social and economic impacts of non-renewable resource development and contradict recommendations from the Organization for Economic Cooperation and Development and the Department of Finance’s own advisory committee on business taxation reform.

On June 12, the Department of Finance proposed amendments to the Income Tax Act as part of the 2003 Budget which:

• reduce the mining industry Corporate Tax rate, lowering it from 28% to 21% by 2007 and remove the Resource Allowance;
• introduce a 10% Investment Tax Credit for companies based on their exploration expenses.

These changes are in addition to provincial tax breaks and subsidies and a planned removal of the Capital Tax in 2008.

The changes directly contradict recommendations from the Organization for Economic Cooperation and Development that Canada’s “preferential tax treatment of conventional resource sectors, such as oil and gas and minerals and metals be eliminated” on both environmental and economic grounds. The changes also contradict the recommendations of the 1998 report of the Minister of Finance’s Technical Committee on Business Taxation, which recommended that the favourable tax treatment of non-renewable resource sectors relative to other sectors of the economy be ended.

It is important to understand, as highlighted by the Technical Committee on Business Taxation, that the non-renewable resource sectors already have very low effective tax rates relative to other sectors as a result of the special tax provisions that they enjoy for such things as exploration and development expenses, and payment of provincial mineral royalties. The non-renewable resource sectors were not included in the 2000 federal corporate tax cut because their federal tax rates were already so low.

Mining moves more earth than all the world's rivers, is a significant contributor to air and water pollution and leaves behind over 2 million tonnes of toxic waste rock and tailings per day in Canada alone. Estimates of the costs to the taxpayer of closing and cleaning abandoned mines in Canada run into the billions of dollars.

In addition to effectively subsidizing environmentally unsustainable economic activities, the tax changes occur at a time when the economic contribution of the metal mining sector is in decline. A study completed by MiningWatch Canada and the Pembina Institute found that despite growing subsidies from the federal and provincial governments, employment in the sector declined by 12% between 1994 and 2001, and the sector’s contribution to national GDP fell by 8%.

"Canada's landscape is dotted with more than 400 former mining towns and 10,000 abandoned mine sites — indications of the unstable and short-term nature of mining as an economic development strategy," said Dr. Mark Winfield of the Pembina Institute. "We need a tax system that encourages alternative economic development, industrial adjustment and resource efficiency, not the continuing extraction of non-renewable resources at ever higher social, economic and environmental costs.”

The Department of Finance based the proposed additional tax cuts on a technical study released March 3, 2003. No reference to the environmental or social costs of mineral extraction are to be found in the study.

"If we actually respected the enormous environmental and social costs of each ounce of metal we consume, we would find ways to recycle and conserve minerals instead of extracting new ones," said Joan Kuyek, National Co-ordinator of MiningWatch Canada.

For more information please contact:
Joan Kuyek, MiningWatch Canada, 613-569-3439
Mark Winfield, Pembina Institute, 613-235-6288 ext.25

The Green Budget Coalition is comprised of 16 of Canada’s leading environmental and conservation organizations, including Canadian Nature Federation, Canadian Parks and Wilderness Society, Centre for Integral Economics, David Suzuki Foundation, Greenpeace, MiningWatch Canada, Miistakis Institute for the Rockies, Pembina Institute, Sierra Club of Canada, World Wildlife Fund Canada, Canadian Environmental Law Association, Nature Conservancy of Canada, Pollution Probe, Sierra Legal Defence Fund, West Coast Environmental Law