Québec’s Finance Minister, Nicolas Marceau, unveiled the province’s strategy to correct its budget deficit in 2013-2014 by implementing spending restraints and imposing higher taxes for the wealthy while sparing mining companies from the anticipated increase in mining royalties…. for the time being.
Described as an immense source of potential opportunity for Québecers, Mr. Marceau’s intention for the mining industry is to modify the regimes that establish the framework for developing Québec’s non-renewable resources in order to allow Québecers to derive the maximum wealth possible, while simultaneously ensuring that the environment and communities are protected.
The budget tabled on November 20, 2012, by minority government of the Parti Québecois (the “PQ”) is four months ahead of schedule, thus leaving the PQ government little time to address all of the measures it intends to implement in order to stimulate private investment in Québec, particularly in the mining industry. Nonetheless, the budget does set out framework measures that form part of Mr. Marceau’s strategy for ensuring the fruition of Quebec’s mining industry and its plan for Plan Nord.
Specifically, the framework measures proposed by the PQ in their 2013-2014 budget include:
- An interim stay in the anticipated royalty hikes for the mining industry. The PQ government will continue to study royalty regimes for natural non-renewable resources and changes will be made “sooner rather than later,” Mr. Marceau says. Details about a consultation with the industry and the stakeholders affect in order to reach a beneficial consensus on a new royalty regime will be announced “in the coming weeks.”
- The PQ has also confirmed that it will maintain the option of negotiating an equity stake in mining projects.
- Projects that fall under the Plan Nord venture will be subject to an infrastructure review which is currently underway for all active infrastructure projects and spending will be kept to a minimum.
- A new ten year tax holiday for large investment projects in excess of $300 million in limited sectors, such as the manufacturing sector and the transformation of mining resources.
- The extension of the tax credit for investments, available to all regions, and a raise in the rates of the tax credit for businesses in certain resource regions.
- The creation of the Banque de développement économique du Québec to help Québec businesses obtain flexible financial and technical support in all regions of Québec.
The 2013-2014 budget proposed by the PQ appears to have spared the mining industry from an immediate adjustment in mining royalties and has also set forth opportunities to benefit from certain tax credits, however, uncertainty remains within the mining industry as the Finance Minister has stated amongst other things that “obligatory royalty based on the net value and a tax based on excess profits are still viable approaches.” Some commentators are of the view that this adjustment could have potential negative impacts on the mining industry in general. As such, the next couple of months will be crucial for the mining industry and close attention will need to be paid to the decisions made by the government.