Good afternoon Dear friends,

The company you work for operates a mine in a Canadian province that imposes an annual mining tax, the rate of which depends on the profit margin earned from mining operations in the province. Profit margin from mining operations is defined as annual profit divided by annual earnings. Annual earnings is calculated as the gross value of annual mine output, less: operating costs; depreciation; and processing allowance of 10% of the original cost of processing assets. For profit margin in the range of 0% to 35%, the mining tax rate is 16%, in the range of 36% to 50% it is 22%, and above 51% it is 28%.

You are asked to provide an independent check of a colleague's calculation of mining tax, before she uses the result of the calculation in further work to determine the company's income tax liability for the same year.Mining tax payable is an allowable deduction in calculating income tax, which is imposed by both federal and provincial levels of government.

The information your colleague has provided you is as follows:

The gross value of mine output in the year was $30 million

Operating costs totalled $14.5 million

Depreciation for the year was $3 million

The company has not purchased, or disposed of, any processing assets during the year

Part 1

(a) List the type(s) of tax and/or royalty to which your company is subject

(b) Do you have all information you need to calculate the mining tax? If not, what information are you missing?