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Tax revenue

During the first 8 years (construction and ramp-up to full production) the Southey Project is anticipated to contribute $3.05 billion to the provincial gross domestic product (GDP) and result in $811 million in tax revenues.  For each year of operation (next 57 to 92 years) the Southey Project is anticipated to contribute $685 million to the GDP and result in $111.5 million in tax revenues.

In 2012 alone, Saskatchewan’s potash industry was estimated to have contributed $761 million in provincial taxes, royalties, and municipal taxes.

The Province currently collects Crown Royalties on potash produced from Crown lands and a Potash Production Tax is applied to potash produced from both Crown and freehold lands in Saskatchewan.  The profit tax is based on operating profits, and consists of a base payment component and a profit tax component.  The provincial tax revenue (potash production taxes) to be paid by the mine is established in accordance to the Potash Production Tax Schedule of The Mineral Taxation Act, 1983 and The Potash Production Regulations.

In additional provincial royalties and taxes, potash mines also pay municipal taxes.  Municipalities (towns, villages, and rural municipalities) raise most of their revenue through property taxes.  A municipality may use a mill rate factor to transfer some of the cost of establishing or maintaining public services from one group to another (e.g., from residential properties to commercial properties).  By using a mill rate factor, the municipality can make commercial or industrial developments in the area pay a greater share of the costs for public services, thus reducing the property tax for other ratepayers.

Municipal Potash Tax Sharing was established in 1968 in order to decentralize the tax benefits from a potash development.  It was recognized that potash mines have an effect on municipalities surrounding the mine (e.g., increased traffic and increased population) not just on the host rural municipality.  To accommodate for these effects, the program acts to distribute the tax revenue among the rural and urban municipalities within 20 miles (approximately 32 kilometres) of the mine. 

The distribution formula is based on 90% being allocated to the rural municipalities and 10% to the urban municipalities (doesn’t include cities).  Rural payments are based on the surface area of their municipality that is within 10 and within 20 miles of the mine, while urban payments are based on their distance from the mine (within 10 miles or within 20 miles) and their population size.

The 2014 summary of the potash tax sharing distribution is provided below.

 

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