'Taxation by ambush': Judge
Territorial government ordered to accept Agnico Eagle application for tax rebate
Walter Strong
Northern News Services
Published Monday, November 10, 2014
QIKIQTANI/BAFFIN ISLAND
Agnico Eagle Mines Ltd. (TSX:AEM) is eligible for fuel tax rebates after all.
A jumbo drill at Agnico Eagle Mines Ltd. Meliadine project this summer. Running this equipment requires fuel, and Agnico Eagle has relied on a Nunavut fuel tax rebate program to help offset the cost of running a gold mine in the territory. A Nunavut judge ruled recently that the government acted unfairly when it denied a recent tax rebate application. - photo courtesy of Agnico Eagle Mines Ltd. |
In an Oct. 30 ruling, Justice Andrew Mahar ordered the territorial government to accept fuel tax rebates it had previously denied Nunavut's only producing gold mine for work related to the Meadowbank gold mine.
Mahar described the government's handling of Agnico Eagle's tax rebate application as "taxation by ambush." The company can now receive a $1.96-million rebate on territorial taxes paid on 19.7 million litres of fuel.
It all started when Agnico Eagle applied for fuel tax rebates on May 23, 2013 under the 2006 fuel tax rebate program. Qualifying businesses can apply for a rebate of territorial taxes on fuel consumed during operations under the program.
Agnico Eagle had applied seven times between 2006 and 2012 for fuel tax rebates under the program. Five of those applications were successful, earning the company $9.3 million in rebates since 2009.
The two times the company was unsuccessful in its application were due to missed deadlines.
The application deadline under which previous rebates had been earned was a
floating one, stating that appli cations must be submitted within one year of petroleum product purchase or arrival in Nunavut.
The company could file for a rebate every six months.
In May 2012, the government changed the deadline, stating that any rebate application must be submitted by or on March 31.
But, according to Justice Mahar, the territorial government didn't bother to tell Agnico Eagle they had changed the rules.
The court found the territorial government strayed from what would have been fair conduct on the part of the government.
"AEM (Agnico Eagle Mines), despite being the only taxpayer to whom the new section...applied and despite being in occasional telephone and e-mail contact with the Government of Nunavut's Department of Finance, was never informed of the new deadline," Mahar stated in his published reasons for judgment.
In his ruling, Mahar also noted that as late as January 2014, the published government guidelines Agnico Eagle relied on "were ... completely out of date and misleading".
These guidelines, the justice noted, were "the official means by which the government has chosen to communicate with taxpayers."
Moreover, the government-prepared official rebate forms Agnico Eagle used to file its claim made no mention of the new deadline, instead referring to the previous deadline.
"There is no mention made of any different deadline ... or of March 31," Mahar stated.
The government based its defence on the fact that it had fulfilled its duties under relevant government legislation to publish the changes online and in the Nunavut Gazette.
The government's position, as summarized in Mahar's reason for judgment, was that the onus was on Agnico Eagle to be aware of changes to the tax law and not rely on published tax guidelines or forms, even if they are published by the government itself.
Mahar ruled otherwise.
Pointing out that Agnico Eagle was the only taxpayer affected by the change - to the tune of $2 million - and given the state of modern communication, Mahar concluded the government had failed to be a good partner in the very relationship the fuel tax rebate program was meant to foster with the mining industry.
Mahar noted that the mining industry is pretty much the only source of meaningful revenue in the territory outside of the federal government and so is an important partner in the territory's economic growth.
"The net result of the lack of reasonable steps to inform in this case is essentially taxation by ambush," Mahar stated.
Mahar also concluded that the government has a responsibility to keep its official published guidelines and forms current with actual tax legislation.
"If the government is going to go so far as to create guidelines and forms to assist taxpayers in complying with their obligations, then those guidelines and forms should be kept up to date," Mahar stated. "People can be expected to rely on them and they should not be encouraged to do so to their detriment."
Agnico Eagle also applied for legal costs, but was denied.
A request for comment from the Department of Finance was declined. Instead, a spokesperson said the government was considering all options including the possibility of appeal.
Dale Coffin, Agnico Eagle corporate director of communications and public affairs, said the company is disappointed it had to approach the courts to resolve the matter.
"Agnico Eagle takes no satisfaction in this recent court decision, as we were left with no other alternative but to seek the assistance from the Court in resolving this outstanding issue," Coffin stated in an e-mail to Nunavut News/North.
"It is important to understand that the GN fuel rebate is a program that was offered to Agnico Eagle by the GN when Meadowbank was being built in 2010 and it is for the life of the mine. It is not something that we had asked for."
