Thank you.
Honourable members, thank you for inviting me to speak today on Bill C-4.
I'm a tax lawyer with a law firm that is Canada's largest law firm that practises exclusively in the area of taxation. I act for large and small mining companies both Canadian and foreign-based. That role I'm privileged to say has taken me around the world. It has taken me everywhere from the Atacama Desert to the far north of Canada. I spend a lot of time in remote and rural Canadian communities.
You can probably guess what I'm going to talk about today. I am going to talk about the aspects of this bill that deal with certain measures that repeal some deductions for mining companies. But before I get into that I'd like to start by saying it's fair to say, in fact it's fair praise to say, that this bill contains a lot of good measures. Like Mr. Mintz I'm a fan of tax neutrality. I am actually a fan of the invisible hand, and I do see the benefit of a broad base and a low rate. However I'm not an economist. I'm a simple lawyer and in some circumstances I can be convinced that there are exceptions to these rules and they should be made for circumstances where it's merited.
One of these I share with long-standing government policy is the marriage that we've had in place since at least 1972, and indeed in other forms before that. This measure is something that we call accelerated capital cost allowance and we also have accelerated deductions for certain types of other investments made by mining companies in relation to the construction of new mines.
Essentially what these measures do is allow you to take your capital out before you share the profit reward with the government in the forms of tax. These rules are being proposed to be repealed by the budget and I'll be magnanimous about this and say that the government is being very generous in terms of the way they're phasing the rules out. They recognize the fact that the timelines to build mines are long and a significant capital decision has been made long before the decision to repeal the rules was made.
I find it a bit ironic though that the proposal is made at a time when build costs are at an historical high and while mill prices, which are always volatile, are perhaps more volatile than ever in a situation where we have Canadian companies looking at investing in very mature areas like Canada where projects require very complex engineering and a lot of capital, and are very risky.
I think the historical reason for these rules is pretty clear in the record going back to 1966. You can read the Carter Commission and there are lots of reasons for these, but ultimately the government settled on these rules because they recognized that it was a good policy to provide an incentive for people to invest in capital-intensive, highly risky ventures in remote areas in rural Canada. They are a deliberate and conscious departure from tax neutrality. I think that government after government has realized to date that this departure is merited.
The reasons for the departure stated in the budget papers are that the repeal of these rules puts mining on the same footing as the oil and gas industry and it furthers the government's environmental objectives. I'm not an economist but I can tell you anecdotally that I don't think that we're comparing apples and oranges when we compare conventional oil and gas, or even oil sands oil and gas, and hardrock mining in mature areas of Canada. I will leave that to experts to think about.
As for the environmental objectives it's not entirely clear to me what the correlation is. The government says this is to assist their medium-term goals for the use of inefficient fossil fuels. At the same time the government is doing what I think are very good things in terms of funding and encouraging work training and the like in communities that service mining. So we have two messages that are being given by the government here and I don't see how they correlate to environmental objectives.
It goes without saying that mining companies are very large investors in rural and remote Canada, northern Canada. They may be the very largest outside the oil sands. I have read, and I am told by my friends, that some advocacy groups purport that some of the mining companies in Canada are the largest employer of first nations persons. I can tell you by having gone to talk to mining engineers and dealing with communities in terms of the impact benefit agreements that the effect that these employers have in these rural communities is enormous.
I've seen the other side of it—