Erin Weir: PotashCorp Royalties Remain at Rock Bottom
"... Erin Weir continues to ask the hardest questions of any candidate in the Saskatchewan New Democrat leadership campaign. The governing Saskatchewan Party is led by Premier Brad Wall and boosted (to the point of embarrassment) by the province's major daily papers and other MSM outlets. Weir holds Wall's fiscal and natural resource policy under the microscope and it's not as rosy as the government or the press try to tell you it is"
The following comments are by Erin Weir concerning the release of PotashCorp's Fourth Quarter 2012 Report:
"PotashCorp reported today that, in the fourth quarter of 2012, it paid only $18 million of “provincial mining and other taxes” on potash sales of over half a billion dollars ($554 million). Throughout 2012, it paid $180 million on potash sales of $3.3 billion - a nickel for every dollar of potash extracted.
“Provincial mining and other taxes” consists of Saskatchewan’s potash production tax and resource surcharge. It does not include the basic Crown royalty, which increases the provincial return to about eight cents on the dollar.
Saskatchewan's potash production tax has been depressed by inflated writeoffs of 120 per cent of investment. PotashCorp’s press release (page 5) notes, “With reduced capital spending anticipated in potash, which impacts the calculation of the Saskatchewan potash production tax, we expect provincial mining and other taxes to be higher than 2012 levels and approximate 11-13 percent of total potash gross margin.
So, potash revenues should improve as investment tapers off, but will still be inadequate. Gross margin is the profit left after subtracting mining and transport costs from sales. The people who own the resource should collect more than 13 per cent of this value.
I have put forward specific proposals to close loopholes in the potash production tax that would collect a substantially better return for the people of Saskatchewan:
In their January 31, 2013 report, “provincial mining and other taxes” is on page 9 while potash sales and gross margin are on page 13:"