Canada's provincial governments should eliminate tax breaks for mining companies because they have a distorting effect on investment opportunities, reports Bloomberg, citing findings published by economists from the University of Calgary.

The tax breaks offer incentives to invest in projects that might otherwise be uneconomic, asserts a report published last month by Jack Mintz, Director of the University of Calgary's School of Public Policy, and Duanjie Chen, a research fellow at the school. The authors suggest that the provinces should replace special tax credits and a depreciation allowance for mining investments with a rent-based cash-flow tax for the industry.

Canada's federal government is already planning to cut about US$53 million (C$55 million) in tax breaks for mining companies and lower deduction rates for mineral-property development, according to the news source.

"Provincial treasuries certainly cannot afford these breaks, and neither can the Canadian economy as a whole," the economists state, as quoted by Bloomberg.

The authors also call for the federal and provincial governments to do more to improve tax neutrality between mining and non-mining industries.

Mining, quarrying and oil and gas extraction accounted for about 8 percent of Canadian gross domestic product in February, according to Statistics Canada.