Fertilizer Industry Braces for Loss of Potash Tax Credit

The Canadian fertilizer sector is up in arms after the Saskatchewan provincial government made no public consultations before deciding to scrap C$117 million in potash tax credits.

The tax credit system, which featured a potash production credit, had been in place since 1990, and was established to help offset some of the costs producers were bearing while the market was in a downturn.

However, in 2019, the Saskatchewan government is hoping to use the C$117 million generated by eliminating the tax break to balance the provincial budget.

Fertilizer Canada — a group representing agricultural manufacturers, wholesalers and retail distributors of nitrogen, phosphate, potash and sulfur fertilizers — is disappointed that the government is targeting the sector so disproportionately.

“This is not the way to treat the potash industry, which continues to contribute so much to the Saskatchewan economy,” Garth Whyte, president and CEO of Fertilizer Canada, said in the announcement.

Canada is the world’s largest potash producer, accounting for 29 percent of world totals, roughly 20.3 million tonnes of a global output of 60.4 million tonnes.

“Potash companies have always been willing to engage with the Saskatchewan government through a consultative process to review the resource tax structure,” said Whyte. “This surprise C$117-million tax announcement is very disappointing.”

The 2019 budget is the first time the province has balanced its books since 2014. However, the fertilizer sector is predicting massive job losses in the industry and a reduction in the sector’s ability to compete in a globalized market as a result of the lost tax incentives.

“These changes will result in Saskatchewan potash production being subject to the highest royalty and tax rates in the world,” explained Whyte.

“Fertilizer markets are driven by global supply and demand factors. Increased tax burdens create another hurdle for Canadian companies to remain globally competitive.”

The new tax schedule takes effect April 1, 2019.

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Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.