I examined the taxation of Allana and Western Potash (see below).  The taxing system in Saskatchewan is a little more complicated to understand since there are taxes coming from different sources and taxes will vary according certain parameters (how much production, per tonne profit, etc.).  When you add up all the taxes in Saskatchewan, it comes very close to the level of taxation of Ethiopia.  Having said that, Allana will have a tax holiday of 8 years according to the FS (WPX will have a tax holiday of 10 years but only for the "Base payment production tax").  So, when the tax holiday is taken into consideration, I might be wrong but I think Ethiopia has currently a more advantageous tax system for a new mining company than Saskatchewan.

AAA taxes

 The economic analysis also included government tax and levies based on current Ethiopian published legislation and regulation, assuming:

Government Royalties: 4% on revenue
Government free carried interest: 5%
Corporate taxes: 35%

You can add a tax holiday of 8 years (according to the FS (p.190))


WPX taxes according to the FS (Crown Royalty, Corporate Capital Tax Resource Surcharge, Potash Production Tax, and Income Tax)

22.1.7 Taxes and Royalties

Four taxes were included in the cash flow. In addition to corporate income tax, WPX is
subject to three specific resource taxes. Saskatchewan’s general tax rate on corporate taxable
income is 12%. Under the Potash Production Tax Schedule of the Saskatchewan Mineral
Taxation Act, 1983 and the Potash Tax Regulations introduced in 1990, there are three taxes that
would apply to the Milestone Project:

? Base payment production tax

? Profit tax

? Royalties

The base payment and profit tax are considered to be potash production taxes.

The base payment is a monthly payment based on estimated sales for the year, with a rate
in 2011 that has a minimum payment of $11.00/t and a maximum payment of $12.33/t sold of
K2O. As a new producer, however, Western Potash would be exempt from paying this tax for
10 years
, providing its production capacity exceeds 122,000 t of K2O per year.

The profit tax is a progressive payment based on net profit from mine operation, with the
rate of tax based on per tonne profit, net of base payments, corporate allowance (currently 2%),
corporate office incentive, depreciation allowance (120% on new capital expenditures in excess
of 90% of a company’s 2002 capital expenditures), loss carry-forward (to a maximum of
5 years), research and development tax credit (40% of approved expenditure) and royalties. The
profit tax rate payable in 2011 was 15% on profit up to $59.55/t of K2O and 35% for profit over
$59.55/t of K2O.

Royalty rates payable under Section 38 of The Subsurface Mineral Regulations (1960), to
the province of Saskatchewan vary between 4.25% and 9.0% of the sale value (US$ FOB mine
gate), depending on the grade of the ore and value of production on land with Crown mineral
rights. Based on drilling results, the grade from the Milestone Project is less than the 21% K2O
grade threshold and the corresponding rate of royalty will be the lowest level of 4.25%. This
gross royalty rate is subject to a 51% write-off for operating costs, effectively putting the net
royalty rate at around 2.1%. Royalty rates in respect of production from freehold subsurface
mineral leases will reflect the same level as those paid for production from Crown lands.

Mining activities are also subject to other federal and provincial taxes, such as the GST,
PST, less applicable allowances, credits, and deductions. Although Saskatchewan no longer
imposes a capital tax on corporations (it was eliminated in 2008), it does apply a 3% resource
surcharge based on the value of fiscal-year resource sales, including potash, oil, natural gas,
uranium and coal, for companies with gross assets of $100 million or more (as determined by its
balance sheet for income tax purposes) and a positive taxable paid-up capital balance. A
resource company with gross assets under $100 million may deduct sales up to $2.5 million from
its value of resource, the amount being the lesser of the value of resource sales and $2.5 million
less the proportion of salaries paid outside Saskatchewan. In the case of potash, the value of
resource sales (gross revenue) is determined by Section 5 of The Potash Production Tax