Lumber Prices Up, Taxes down

An interesting press release from the government of BC detailing how the increase in lumber prices affects the Export tax.


INCREASED LUMBER PRICES MEAN DECREASED EXPORT TAX

VICTORIA – Due to strong lumber prices, effective May 1, the amount of tax that B.C.’s softwood lumber producers pay on shipments to the U.S. will be reduced by one-third, Forests and Range Minister Pat Bell announced today.

“The reduction in the export tax is good news for B.C.’s lumber companies and employees that work for them,” said Bell. “This is the highest average lumber price since the Softwood Lumber Agreement was signed in October 2006. It is a positive indicator that B.C.’s forest sector may be starting on the road to recovery.”

Under the 2006 Softwood Lumber Agreement, companies exporting softwood lumber to the United States are required to pay an export tax on their shipments. The formula for determining the tax is based on the average price over a four-week period 21 days before the start of the month. The higher the average lumber price is, the lower the export tax.

In this case, since the four-week average lumber price, as given by the Random Lengths Framing Composite Price Index, is now $US 325 per thousand board feet, the export tax rate that will be in effect May 1 will be 10 per cent, down from 15 per cent. The export tax would reduce to zero if lumber prices exceed $US 355 per thousand board feet.

Random Lengths framing lumber composite prices are published each Friday. The export tax is collected at the border by the Canada Revenue Agency and then the tax paid by B.C. producers is re-directed to the provincial government.

“While the U.S. is still our largest market, I am also encouraged by the increased shipments that we’re seeing to other countries,” said Bell. “B.C.’s lumber prices and volumes of shipments may fluctuate from month-to-month, but I’m hopeful we will remain on a positive trend. However, the key to sustained recovery will be sustained demand for B.C.’s forest products.”

In January 2010, B.C.’s total softwood lumber exports were 22 per cent greater than they were in January 2009. This includes a four-fold increase in the exports to China, a six per cent increase in exports to the U.S. and an 11 per cent increase in exports to Japan.

The U.S., China, and Japan are B.C.’s largest markets for softwood lumber.

http://www.news.gov.bc.ca

-----