From The Economist:
ONE might not have too much sympathy for fossil fuel companies, currently enjoying all the benefits of high coal and oil prices. But they are crying foul in their competition with an (admittedly undersized) non-hydrocarbon fuel—uranium. According to America’s mining act of 1872, framed at a time when spurring development of the wide-open West was all the rage, no government agency can refuse a mining permit on federal land, or charge a royalty. And uranium is treated just like other hardrock minerals such as gold and copper. Oil, gas, coal and timber companies, by contrast, all have to pay substantial royalties, of up to 12.5% of gross income, when they extract from federal lands.
Under SCM Agreement Article 1.1(a)(1)(ii):
1.1 For the purpose of this Agreement, a subsidy shall be deemed to exist if:
(a)(1) there is a financial contribution by a government or any public body within the territory of a Member (referred to in this Agreement as "government"), i.e. where:
...
(ii) government revenue that is otherwise due is foregone or not collected (e.g. fiscal incentives such as tax credits)
By exempting uranium mining from royalties, does the 1872 mining act forego government revenue (i.e., the royalties) that is otherwise due, and therefore constitute a "financial contribution"? In U.S. - FSC (Article 21.5), the Appellate Body said this when examining a tax measure:
91. In identifying the normative benchmark, there may be situations where the measure at issue might be described as an "exception" to a "general" rule of taxation. In such situations, it may be possible to apply a "but for" test to examine the fiscal treatment of income absent the contestedmeasure. We do not, however, consider that Article 1.1(a)(1)(ii) always requires panels to identify, with respect to any particular income, the "general" rule of taxation prevailing in a Member. Given the variety and complexity of domestic tax systems, it will usually be very difficult to isolate a "general" rule of taxation and "exceptions" to that "general" rule. Instead, we believe that panels should seek to compare the fiscal treatment of legitimately comparable income to determine whether the contested measure involves the foregoing of revenue which is "otherwise due", in relation to the income in question.
92. In addition, it is important to ensure that the examination under Article 1.1(a)(1)(ii) involves a comparison of the fiscal treatment of the relevant income for taxpayers in comparable situations. ...
Assuming the "treatment of legitimately comparable income" standard could be applied in the context of charging royalties, are royalties for uranium mining legitimately comparable with those for oil, gas, coal and timber extraction? Are the "situations" comparable?
