Released on November 20, 2009
The government has made changes to Saskatchewan's potash production tax to ensure a level playing field for both existing potash producers and new companies entering the province's potash industry.
The changes, effective January 1, 2010, establish a tax base for new industry entrants as well as a tax floor for all potash producers.
"These changes ensure that new entrants to our potash industry do not receive an unfair competitive advantage over our existing producers," Energy and Resources Minister Bill Boyd said. "As well, the establishment of a tax floor means that over the long term the province will maintain an appropriate share of the revenues from new potash mines and mine expansions."
The changes address a consequence of an earlier government policy decision. In August 2003, the government eliminated profit tax on new potash sales above average sales levels from 2001 and 2002. Potash producers were able to reduce their effective profit tax rates by expanding their sales beyond their 2001-02 levels.
Boyd said that without a change to the existing policy, a new entrant would have essentially had a zero per cent profit tax rate because all of its production would have been in excess of its non-existent 2001-02 production levels.
Effective January 1, a new company entering Saskatchewan's industry will be assigned a tax base equal to 75 per cent of its sales up to a total of one million tonnes of K2O (potassium oxide). Once this base level of sales is reached, the company will be able to further expand its sales without increasing its taxable tonnes, thus providing the company with similar treatment to that afforded existing producers in 2003.
Also on January 1, all potash producers will be subject to a tax floor equal to 35 per cent of their total sales. The tax floor will ensure that regardless of growth, a base level of sales for all producers is subject to profit tax, thereby ensuring the Saskatchewan tax payer receives a fair and appropriate payment for the resource.
"While there has been a diversity of opinion amongst producers, I want to compliment all companies involved for their professionalism and most importantly for their commitment to fairness and the future of our province," Boyd said.
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For more information, contact:
Bob Ellis
Energy and Resources
Regina
Phone: 306-787-1691
Email: robert.ellis@gov.sk.ca