Optimal mineral taxation in Manitoba: an exploration of Monte Carlo simulation analysis
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Date
2014-09-10
Authors
Verhaeghe, Joseph Rene Stephen
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Abstract
Manitoba has abundant mineral deposits and the mining sector is significant for its economy, especially outside the capital region. This paper examines the Manitoba mining taxation regime, using two approaches. First, a conventional regression analysis is used to estimate the impact of the 2009 mining tax cut on Northern employment and capital investment. This approach potentially offers a general indication of how tax policy influences economic advantages. Unfortunately, data limitations impede the analysis. Second, a mining firm is modelled to directly examine the effect of various tax structures on profitability. A hypothetical underground mine is modelled using discounted cash flow and net present value methods. Monte Carlo simulation will add a further dimensionality to the analysis, evaluating the effects of taxation when making probability assumptions on metal grade, prices, and operating costs. The new mine tax holiday stands out as a significant tax benefit for the miner.
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Keywords
mining, minerals, OLS, regression, taxation