BHP (NYSE:BHP) Claims Tax Revenue More than Conference Board Estimates

Head of non-ferrous at BHP Billiton (NYSE:BHP), Andrew Mackenzie, said the findings of the Conference Board of Canada that over a period of ten years the province of Saskatchewan would lose as high as $2 billion from the acquisition of Potash Corp (NYSE:POT) and the development of the Jansen mine, is overstated.

Mackenzie says the province would probably actually gain tax revenue during that period rather than lose revenue. Most of the tax benefits are simply being deferred, so on the front end there will be less taxes, but on the back end a huge increase in taxes, according to Mackenzie.

The Board did admit over a period of time the acquisition of Potash by BHP would probably end up benefiting the province and Canada in general.

Even so, the report said "the (PotashCorp) acquisition would allow the company to organize its affairs in such a way as to minimize corporate taxes paid to the province."

The question is: so what? That's why tax laws and deductions are in place, in order to stimulate business deals which benefit everyone over the long run.

The reason BHP claims tax revenue is understated even on the front end, is the number of workers on the construction phase of the projected were vastly underestimated. The Conference Board said made their determination based on 1,000 people working during that phase, when in fact it would be closer to 4,000 during the peak of the work.

That's a lot more taxes from 4,000 workers than the 1,000 workers assumed by the Board. Workers also spend money generating more tax revenue for the province, added Mackenzie.

This is about an unholy alliance between the Canadian government and the cartel, monopoly of Canpotex, which has been fixing prices for a long time in order to control and support margins in the business.

Canpotex includes competitors (if you could identify them as such) Agrium (NYSE:AGU) and Mosaic (NYSE:MOS).

The illogical and unreasonable response from Potash and the Canadian province, which was more emotional than practical, reveals this isn't really about paying a good price for the company or anything else. It's about the monopoly and price controls resulting from the potash monopoly, and by extension, Saskatchewan monopoly, that has created all the emoting.