How the Liberals plan to pay for new tax breaks for oil producers
The federal government is offering a slew of tax breaks to oil and gas producers that will provide a boost to the industry in a major overhaul of the country’s tax system.
Key points:The government says the tax breaks will go towards new infrastructure in the province and will help the sector attract new jobsThe money will be used to help attract oil and coal projects in the countryThe money is earmarked for infrastructure in AlbertaThe Liberals say the measures will help Canada’s oil and natural gas sector attract thousands of new jobs in the oil and mining sectorThe new tax incentives include a $1.4-billion cash payment to producers and a $200-million lump sum payment to the province for the cost of upgrading and developing new oil and fuel infrastructure.
“These tax breaks are intended to stimulate the Canadian economy, provide jobs and grow the Canadian resource base,” Finance Minister Joe Oliver said in a statement.
“Canada’s oil production and our overall energy security depend on the continued success of our resource sector.
This government is committed to ensuring these tax breaks help the oil industry succeed in the long-term and create the jobs that the energy sector needs to thrive.”
The federal government says it will provide $1 billion to the federal and provincial governments to help companies with capital costs to upgrade or develop new facilities.
The money will go toward infrastructure in Canada, including a new pipeline for liquefied natural gas (LNG) and a new natural gas export terminal in New Brunswick.
It also will pay for a $3-billion infrastructure investment to build pipelines in Saskatchewan and Alberta.
“This new infrastructure will make it possible for Canadian companies to export oil and other natural gas to the United States, Australia, and other markets,” Oliver said.
The Liberal government says a new tax credit for new projects will help companies hire more workers, increase revenue and help pay for infrastructure.
The government will give $150 million to help the province with its infrastructure projects and $300 million to fund oil and energy projects in Alberta.
The remaining $1-billion will go to the Canadian Association of Petroleum Producers, the Canadian Energy Research Institute and other non-profit groups.
“This will help Alberta and Canada compete with the United Kingdom and the European Union for the lucrative global markets of liquefiers and energy storage,” Oliver added.
Oliver said the government will also offer $400 million for the federal government to help small and medium-sized enterprises invest in their own infrastructure and expand their production capacity.
The Liberals said the money will help pay down the federal debt and help support the economy in the medium-term.
“The new money will fund the long term debt servicing costs of these companies and create a safe haven for their assets,” Oliver noted.
“We have invested over $500 million in new pipelines, and this will continue to fund this work.”
The government has been struggling with the effects of a drop in oil prices that has hit the oil sector hard and is now expected to hit gas as well.
Oliver acknowledged that oil production in Canada is not a panacea, but said it can help to boost the economy.
“With this $1bn, we are ensuring that our oil and oil sands industries can continue to attract new investment,” Oliver explained.
“It’s important to note that there will be a transition period where we will continue this investment to help these industries and support our economy, and that’s the key.”
The Liberals are promising a number of tax cuts, such as one that will allow oil andgas producers to deduct up to $50,000 in taxes from their federal income taxes.
The money comes in addition to a $2.2-billion investment announced last month to expand the Canadian Arctic National Wildlife Refuge and provide new jobs for more than 1,000 people in the region.