September 3, 2019
Mr. Pierre Gratton
President and CEO
The Mining Association of Canada
275 Slater Street, Suite 1100
Ottawa ON K1P5H9
Dear M. Gratton:
Deductibility of Mining Taxes
I am writing in response to requests by your organization in respect of the deductibility of mining taxes in computing the income of a taxpayer. More particularly, I understand that the issue is in respect of reassessments, under the relevant statutes, of mining taxes that are made, in some instances, many years after the taxation year in which the relevant operations occur, so late that income tax reassessments cannot be made to take into account the changes to the taxpayer's mining tax liability for that year.
Mining taxes are generally levied by a province or territory in respect of production from mining operations. Under the combined operation of paragraph 20(1)(v) of the Income Tax Act (the Act) and subsection 3900(2) of the Income Tax Regulations (the Regulations), taxpayers are allowed a deduction "in respect of taxes on income for the year from mining operations". Thus, where a taxpayer is assessed an additional amount of mining taxes, say, two years after the year in which the relevant mining activities are carried on, the taxpayer must amend its tax return for the earlier year in order to claim a deduction in respect of the payment of the additional mining tax.
I understand that there are taxpayers who have been reassessed additional mining taxes a number of years after the year in which the relevant mining operations took place. In some of these situations, the taxation year in which the relevant mining operations were carried on is barred from reassessment under the Act at the time the taxpayer attempted to deduct the amounts in computing its income tax liability. In such cases, the Canada Revenue Agency has found itself unable to accept deductions for these increased mining taxes. You object to this treatment.
Our Comments
We are sympathetic and are prepared to recommend to the Minister of Finance that amendments be made to the Act and the Regulations to address this issue.
Specifically, we will recommend that a deduction for mining taxes be allowed for the taxation year in which the mining taxes are paid if the mining taxes paid are in respect of income from mining operations that were carried on in a prior taxation year of the taxpayer that is barred from reassessment under the Act.
The deduction will be equal to the amount that would have been allowed for the taxation year in which the relevant mining operations were carried on if that year had not be barred from reassessment. We will also recommend that this amendment be made retroactive to taxation years that end after 2007.
While we cannot offer any assurance that either the Minister of Finance or Parliament will agree with our recommendation in respect of this matter, we hope that this statement of our intentions is helpful.
Yours sincerely,
Brian Ernewein
Assistant Deputy Minister - Legislation
Tax Policy Branch
