Supporters of a windfall tax for Canada’s oil and gas sectors can look abroad to make their case.
The European Commission has proposed a one-time tax on the energy sector to financially help families and businesses suffering from high inflation. According to her, such a policy would raise more than 140 billion euros (185 billion Canadian dollars) for member states.
The European Union is not the only jurisdiction trying to get a stronger contribution from the energy sector. Earlier this year, the UK introduced a one-time tax on oil and gas producers. However, new Prime Minister Liz Truss has opposed such a measure and has already indicated that she will not introduce a new earnings tax.
In the United States, the left demands the use of oil and gas companies to fight inflation.
Many governments are facing strong pressure globally to impose an unexpected tax on some major companies, particularly in the oil and gas sectors, which have posted record profits since the start of the COVID-19 pandemic.
Statistics Canada indicated in its latest quarterly GDP report that non-financial companies have benefited from stable energy prices. Thus, according to the agency, dividends paid by non-financial companies increased by 9.1% in the second quarter. In comparison, employee compensation increased 2.0% over the same period.
Economist David MacDonald of the Canadian Center for Policy Alternatives estimates that the ratio of after-tax corporate profits to the overall Canadian economy peaked in the second quarter of 2022.
Moreover, the share of workers’ compensation is at its lowest level since 2006. “The inflation period is a great time for corporate profits, and even less so for workers’ wages.”
Mr. MacDonald advocates a one-time tax to correct this imbalance.
In Canada, the National Democratic Party is calling on the federal government to impose a tax “on the excessive profits of oil and gas companies and large grocery chains”. This money can be redistributed to low- and middle-income families who are struggling with inflation.
The National Party welcomed the federal government’s announcement on Tuesday that it would double the GST deduction for six months. However, NDP financial critic Daniel Blake says he has received no indication that Finance Minister Chrystia Freeland is considering introducing a one-time tax.
“We will continue to pay,” he said. We can be optimistic because of the announcement of the GST refund. So even if the government is wrong, we can get it back on the right track. »
The Ministry of Finance refuses to comment on this matter.
Some economists oppose such a move, saying it could risk discouraging investment.
Michael Smart, a professor of economics at the University of Toronto and co-director of the Finances of the Nation project, says the EU’s decision to introduce an unexpected tax reflects the continent’s unique situation where energy prices have skyrocketed.
“We do not face the same situation here, confirms Professor Smart. It is not justified here. »
It also points to the difficulty of applying a one-time tax. These methods should be used in moderation.
If the government wants to move forward with a one-off tax, says Mustafa Askari, chief economist at the Institute for Finance and Democracy, it must first be sure of its target.
“Targeting the energy sector is weird to me, unless I’m in dire need of government money,” he says.
And since government revenues are rising thanks to inflation, they don’t need additional money, says Al-Askari.
The economist also fears that oil and gas companies will find a way to pass the bill to consumers by raising their prices.
Polls show that Canadians support the idea of taxing more companies that have made high profits during the pandemic. Thus, a survey conducted in July 2021 by Abacus Data for the Broadbent Institute and the Professional Institute of Public Service Canada showed that 87% of respondents supported such a measure.
The survey was conducted online with 1,500 Canadian adults from July 13 to July 19, 2021.
Mr Blaecke says the National Party is counting on popular support to convince liberals of the benefits of a one-time tax on oil and gas companies.
“The more Canadians who support the NDP to demand this type of measure, the higher the chances of a positive outcome.”
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Sophie Laurent is a contributor to Vaughantoday.ca, covering a wide range of topics including local news, politics, business, technology, sports, entertainment, and lifestyle. She focuses on delivering clear, balanced reporting that helps readers stay informed about current events and issues that matter to their communities. Sophie is committed to presenting accurate information, practical insights, and relevant stories in a straightforward and reader-friendly manner, making complex topics accessible to a broad audience.