Agrium reports that it paid half as much to the people of Saskatchewan in the second quarter as it had in the same quarter of last year. The companyâ€™s quarterly â€œpotash profit and capital taxâ€ payment dropped to $8 million from $15 million a year ago.
Agriumâ€™s only potash mine is in Saskatchewan. The value of its potash sales has barely changed: $246 million in the second quarter compared to $259 million a year ago. As a percentage of sales, â€œpotash profit and capital taxâ€ fell to just 3% from 6%.
Agrium notes â€œa reduction in potash profit tax in 2012 due to deductions from the taxable base for investment related to our Vanscoy expansion project.â€ That refers to the Saskatchewan government allowing potash companies to immediately write off 120% of investment from profits before paying any potash production tax on them.
Given that Saskatchewanâ€™s resource surcharge (â€œcapital taxâ€) is 3% of sales and Agrium paid only that amount, the implication is that it paid (almost) no potash production tax. The company also pays Crown royalties, which might bring the provinceâ€™s total return up to 5% or 6%.
The provincial government should collect a better return for the people of Saskatchewan, who own the resource. In particular, why are we allowing potash companies to write off more than 100% of the amount they actually invest?
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