PotashCorp Reports Inadequate Royalties

July 25, 2013

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PotashCorp reported today that it paid $81 million of “provincial mining and other taxes” on $975 million of potash sales in the second quarter of 2013. In other words, Saskatchewan’s potash production tax and resource surcharge amounted to 8% of potash sales.

Adding the basic Crown royalty of just over 2% (which PotashCorp includes in the “cost of goods sold”), the province’s total royalty return is just over one-tenth of the value extracted by PotashCorp. As the company exhausts its extremely generous investment write-offs, potash royalties have gone from a nickel on the dollar to a dime on the dollar.

Mining and transport costs amount to only 35 cents per dollar of potash sold. (See page 12 of PotashCorp’s report: ($294 million for the cost of goods sold + $68 million of freight, transportation and distribution)/$975 million of potash sales – the Crown royalty of 2 cents per dollar.) The people of Saskatchewan, who own this lucrative resource, should receive much more than a dime of the remaining 65 cents.

Erin Weir is an economist with the United Steelworkers union and a CCPA research associate.

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