Saskatchewan province has the world's largest reserves of potash, a mineral that is used as a major fertilizer. Three of the world's top potash producers have their mines in this region, which is also known for mining of certain other major minerals.

As a part of the budget for 2015-16 unveiled on 18th March, Saskatchewan Government has announced interim changes in potash taxation. The Government says: "Strength in the potash industry and a change in the Potash Production Tax will help offset the (Canadian) $661 million decline in oil revenue from last year's budget due to the falling oil price. The total tax deduction potash producers receive from their capital spending will now be used over a longer period of time."

According to an official document, "Effective January 1, 2015, the province is changing the way in which potash companies can claim capital expenditures as tax deductions. All capital expenditures will continue to accrue at the rate of 120 per cent but the rates at which capital expenditures are deductible from annual gross sales revenues will be reduced."

The Government says: "It is expected that deferring these deductions will increase provincial potash revenues by $150 million this year. This measure is an interim step that will be followed by a broader review of the entire potash taxation regime. The review process will gather input from sector stakeholders. Coupled with growth and strength in the potash industry, total potash revenues are expected to be up nearly $400 million over last year's budget."

The announcement, which reportedly led to decline in share prices of several Canada-based potash firms, generated an immediate adverse response from Potash Corporation of Saskatchewan Inc. (PotashCorp), the World's largest potash producer.

The company says that changes to potash taxation are "expected to decrease the company's 2015 pre-tax earnings by CDN $75 to $100 million. The impact reflects a significant change in the timing of the annual allowable deduction for expansion and maintenance capital expenditures and is most pronounced in 2015 – and to a lesser extent 2016 – as we wind down our capital expansion projects and incur higher maintenance capital spending as a result of these expansions."

A company release has quoted PotashCorp President and CEO Jochen Tilk as stating "While we understand the difficult revenue situation facing the Government, we are nearing completion of a $6 billion investment in Saskatchewan which was based on the existing tax structure remaining in place. Changing the rules midstream impacts the ability of our shareholders to earn a fair return on their capital and undermines Saskatchewan's relative competitiveness."