Advocates of a windfall tax for Canada’s oil and gas sectors can look abroad to defend their position.
The European Commission has proposed levying a one-off tax on the energy sector to financially help households and businesses struggling with high inflation. According to her, such a policy will raise more than 140 billion euros (C$185 billion) 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 imposed 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 impose a new windfall tax.
In the United States, the left is demanding that oil and gas companies be used to fight inflation.
Various governments are facing strong pressure globally to impose a windfall tax on some large corporations, particularly in the oil and gas sectors, which have posted record profits since the start of the COVID-19 pandemic. 19.
Statistics Canada indicated in its last quarterly report on gross domestic product that non-financial corporations benefited from the firmness of energy prices. Thus, according to the agency, dividends paid by non-financial companies rose by 9.1% in the second quarter. By comparison, employee compensation increased by 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 has reached its nadir since 2006. “An inflationary period is a great time for corporate profits, less so for workers’ wages. »
Mr. Macdonald supports the imposition of a one-time tax to correct this imbalance.
In Canada, the NDP is calling on the federal government to introduce a tax “on the excessive profits of oil and gas companies and large grocery chains”. This money could be redistributed to low- and middle-income families who are struggling because of inflation.
The NDP welcomed the federal government’s announcement on Tuesday that it would double the GST rebate for a six-month period. However, NDP Finance Critic Daniel Blaikie says he has received no indication that Finance Minister Chrystia Freeland is considering implementing a one-time tax.
“We’re going to keep pushing,” he said. We can be optimistic because of the announcement on the refund of the GST. So even if the government is wrong, we can put it back on the right track. »
The Ministry of Finance refuses to comment on this subject.
Some economists oppose such a move, saying it would risk discouraging investment.
Michael Smart, professor of economics at the University of Toronto and co-director of the Finances of the Nation project, says the European Union’s decision to impose a windfall tax reflects the continent’s unique situation where energy prices rose dramatically.
“We are not facing the same situation here, underlines Professor Smart. It is not justified here. »
He also points out that it is difficult to implement a one-time tax. This means should be used sparingly.
Mostafa Askari, chief economist at the Institute for Fiscal Affairs and Democracy, says if the government wants to go ahead with a one-time tax, it must first be certain of its objective.
“Targeting the energy sector is weird to me, unless you’re in desperate need of government money,” he says.
And since the government’s revenues are rising thanks to inflation, it doesn’t need the extra money, says Askari.
The economist also fears that oil and gas companies will find a way to pass the bill on to consumers by raising their prices.
Polls suggest that Canadians support the idea of taxing even more companies that have made high profits during the pandemic. Thus, a poll conducted in July 2021 by Abacus Data for the Broadbent Institute and the Professional Institute of the Public Service of Canada indicated 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. Blaikie says the NDP is counting on public support to convince the Liberals of the merits of a one-time tax for oil and gas companies.
“The more Canadians who side with the NDP to demand this kind of measure, the higher the chances of a positive outcome. »