Canada’s Mining Taxation Needs to Be Efficient and Simple

Canada has one of the most competitive mining tax systems in the world. For most mining products, the overall tax burden in Canada is lower than in competing jurisdictions, which means that more targeted tax incentives aren’t needed to attract investment. This paper evaluates Canada’s mining-tax system across provinces and compares it with the tax regimes of 27 major mining jurisdictions worldwide, including Australia, Chile, Peru, South Africa, China, the United States and several Latin American and African producers.

The paper recommends several reforms to simplify and modernize Canada’s mining-tax system. These include eliminating or scaling back targeted critical-mineral incentives and exploration tax credits, reducing development deductions under the corporate income tax from 30 to 25 per cent and reforming provincial processing allowances so they exempt only genuine processing income rather than extraction profits. In the exuberance to find critical minerals, incentives have become excessive and poorly administered thereby distorting the allocation of resources in the economy.

Provincial mining taxes should be converted to cash-flow taxes that fully expense capital investments and allow unused deductions to earn interest, following British Columbia’s model. Such reforms would tax economic rents more efficiently while reducing distortions.

Overall, the recommendations would lead to a reduction in the effective tax rates on new investment in non-critical mining from 13.2 per cent to 12.5 percent, averaged across provinces. The effective tax rate on critical mining would increase from 10.2 per cent to 12.5 per cent although the tax burden would fall in Quebec and Alberta with the adoption of a cash flow approach to taxing mining. The policies would make the tax system more neutral across different mining projects while maintaining tax competitiveness for mining projects.

The report was written prior to the announcement by the federal government on September 15th, 2026 that it will expand expensing from 15 per cent to two-thirds of assets. Expensing will enable companies to write off qualifying capital expenditures immediately rather than through time, thereby providing an interest free loan to companies. It will result in an even more favourable treatment of mining in Canada compared to other countries that is shown below. It will also introduce new economic distortions by favouring short-lived compared to long-lived capital, thereby making the mining tax system more non-neutral. This paper suggests a different path should be pursued that maintains competitiveness but reduces economic distortions.