Main menu:

History of RPE Thought

Posts by Tag

RSS New from the CCPA

  • A critical look at BC’s new tax breaks and subsidies for LNG May 7, 2019
    The BC government has offered much more to the LNG industry than the previous government. Read the report by senior economist Marc Lee.  
    Canadian Centre for Policy Alternatives
  • The 2019 living wage for Metro Vancouver April 30, 2019
    The 2019 living wage for Metro Vancouver is $19.50/hour. This is the amount needed for a family of four with each of two parents working full-time at this hourly rate to pay for necessities, support the healthy development of their children, escape severe financial stress and participate in the social, civic and cultural lives of […]
    Canadian Centre for Policy Alternatives
  • Time to regulate gas prices in BC and stop industry gouging April 29, 2019
    Drivers in Metro Vancouver are reeling from record high gas prices, and many commentators are blaming taxes. But it’s not taxes causing pain at the pump — it’s industry gouging. Our latest research shows that gas prices have gone up by 55 cents per litre since 2016 — and the vast majority of that increase […]
    Canadian Centre for Policy Alternatives
  • CCPA welcomes Randy Robinson as new Ontario Director March 27, 2019
    The Canadian Centre for Policy Alternatives is pleased to announce the appointment of Randy Robinson as the new Director of our Ontario Office.  Randy’s areas of expertise include public sector finance, the gendered rise of precarious work, neoliberalism, and labour rights. He has extensive experience in communications and research, and has been engaged in Ontario’s […]
    Canadian Centre for Policy Alternatives
  • 2019 Federal Budget Analysis February 27, 2019
    Watch this space for response and analysis of the federal budget from CCPA staff and our Alternative Federal Budget partners. More information will be added as it is available. Commentary and Analysis  Aim high, spend low: Federal budget 2019 by David MacDonald (CCPA) Budget 2019 fiddles while climate crisis looms by Hadrian Mertins-Kirkwood (CCPA) Budget hints at priorities for upcoming […]
    Canadian Centre for Policy Alternatives
Progressive Bloggers

Meta

Recent Blog Posts

Posts by Author

Recent Blog Comments

The Progressive Economics Forum

PotashCorp, US Regulators and Bruce Johnstone

Multinational corporations generally provide more detail to the US Security and Exchange Commission than in their Canadian annual reports. Thank goodness for American disclosure requirements.

Along with its 2010 Annual Report, PotashCorp released its Annual Report on Form 10-K (a Security and Exchange Commission filing) on Friday afternoon. The following section is on pages 14 and 15:

Royalties and Certain Taxes

Saskatchewan potash production is taxed at the provincial level under The Mineral Taxation Act, 1983 (Saskatchewan). This tax consists of a base payment and a profit tax (“Potash Production Tax”). No Potash Production Tax was paid in 2010. As a resource corporation in the Province of Saskatchewan, we are also subject to a resource surcharge that is a percentage of the value of our resource sales (as defined in The Corporation Capital Tax Act of Saskatchewan). In 2010, the total resource surcharge paid was $74.6 million.

In addition to the Potash Production Tax and resource surcharge, royalties, taxes and rental fees are payable to the Provinces of Saskatchewan and New Brunswick, municipalities and others by potash producers in respect of potash sales, production or property in the Provinces of Saskatchewan and New Brunswick. These royalties, taxes and fees, which are included in cost of goods sold, were $97.9 million in 2010.

For 2010, miscellaneous taxes paid (not included above) totaled $2.2 million. We do not make royalty payments in connection with our phosphate and nitrogen operations.

It is good to see the company confirm in plain English what the numbers in its annual report made clear: “No Potash Production Tax was paid in 2010.”

Saskatchewan’s Potash Production Tax, resource surcharge and miscellaneous taxes are labeled “provincial mining and other taxes,” which totaled $77 million in 2010. In modern parlance, this potash production tax system is generally called “royalties.”

However, the historic Crown Royalties are still payable under Subsurface Mineral Regulations and deductible from the Potash Production Tax. PotashCorp includes these royalties in “cost of goods sold.” The Regina Leader-Post’s financial editor, Bruce Johnstone, noted this accounting quirk yesterday:

. . . the $77-million figure is “disingenuous” and [NDP leader Dwain] Lingenfelter knows it. A closer examination of PotashCorp’s 2010 financial statements indicates the corporation reported $3.4 billion in “cost of goods sold” (which includes base royalties) and $642.8 million in income taxes (which include provincial corporate income taxes).

PotashCorp itself compares the $77-million figure (“provincial mining and other taxes”) with “potash gross margin,” expressing the former as a percentage of the latter in every fourth-quarter report. Those of us who reproduce this comparison are being no more disingenuous than Johnstone’s favourite company.

But he has a point: a more comprehensive measure of “royalties” obviously should include the original Crown Royalties. The problem is that we do not have the numbers.

PotashCorp takes a kitchen-sink approach, mixing together Saskatchewan’s Crown Royalties, all of New Brunswick’s royalties, municipal taxes, etc. for a sum of $98 million. Johnstone unhelpfully multiplies that kitchen sink by 35 in referencing $3.4 billion, a company-wide total that mostly comprises nitrogen and phosphate costs incurred outside the province.

Similarly, he cites $643 million of corporate income tax. As I noted yesterday, only about half of that total is current 2010 Canadian tax payments, as opposed to foreign tax payments and provisions for possible future tax payments. And Saskatchewan gets less than half of the Canadian total.

Johnstone seems satisfied to throw around some big numbers that have little to do with Saskatchewan and conclude that the current system is “working very well.” In fact, the opacity of available data is just one more reason the province needs a thorough royalty review.

Enjoy and share:

Comments

Comment from Paul Tulloch
Time: February 27, 2011, 6:00 am

It is indeed pathetic to realize that there is not a lot of clear information on such a huge issue.

It has always been a sad state of a affairs when canadian companies have to diclse more information to an American regulator such as the US S E C than a Canadian body.

If the Saskatchewan public want to safe guard their natural resources, theyat least should have the right to some level of precision with the data. It is a farce tha our sec at the provincial or national level does not require more disclosure.

Got to love the form 10k. It is one step towards economic democracy. I wonder if the general public has an idea on how little we know about corporate activities.

Write a comment





Related articles