Advocates of wind tax on Canada’s oil and gas industry now have another global authority-setting precedent for the policy.
On Wednesday, the European Commission proposed such a tax on the energy sector and redirect capital to households and businesses struggling with high inflation. It estimates the policy will bring in revenue of 140 million euros (about CAD $186 million).
The European Union is not the only jurisdiction pursuing tax increases on the energy sector. Earlier this year, the UK imposed wind taxes on oil and gas producers. Since then, however, new Prime Minister Liz Truss has bucked the policy and said she would not introduce any new taxes.
Radicals in the United States have also campaigned for a favorable tax rate on oil and gas companies amid rising inflation.
The global push for wind taxes comes as several corporations, especially those in the oil and gas sectors, have posted record profits since the COVID-19 pandemic began.
In Canada, Statistics Canada’s latest quarterly report on gross domestic product said non-financial corporations have benefited from sharp increases in energy prices. According to the federal agency, dividends paid by such companies increased by 9.1% in the second quarter of 2022. Meanwhile, wages for workers in Canada increased by 2%.
David Macdonald, senior economist at the Center for Policy Alternatives Canada, recently looked at how much gross domestic product is measured in corporate profits. His analysis shows that after-tax corporate profits reached a historically high share of total output in the Canadian economy in the second quarter of this year.
In contrast, Macdonald found workers’ compensation as a share of gross domestic product fell to its lowest level since 2006. “Inflationary periods are extremely good times for corporate profits, little than on workers’ wages.”
Macdonald advocates imposing low income taxes to address this trend.
The NDP has called on the federal government to extend the tax levied on financial institutions earlier this year to the oil and gas sector as well as big box stores. The party has argued that the money raised from the wind tax extension could be used to send more money to low- and modest-income families struggling with high inflation.
On the latter proposal, the NDP won when the Liberals announced on Tuesday that they would double the GST reduction in six months. As for the income tax extension, NDP finance critic Daniel Blaikie said he has received no indication from Finance Minister Chrystia Freeland that it has been brought to the table.
“We will continue to push these things,” Blaikie said. “And I think the announcement of the GST reduction is cause for some optimism that even if the government gets it wrong at the border, we can get them to change course.”
The Treasury Department declined to comment on whether it was considering extending the import tax policy.
Many economists oppose wind taxes because they fear they might discourage business investment.
Michael Smart, a professor of economics at the University of Toronto and co-director of the Finances of the Nation project, said the EU’s pursuit of a wind tax reflects a unique situation in the region where energy prices have fallen. dizzy increase.
“We don’t have a similar situation here,” Smart said, adding that the taxes collected are hard to come by and should be rarely used.
“I don’t think it’s warranted (here).”
Mostafa Askari, chief economist at the Institute for Fiscal Studies and Democracy, said that if the government were to pursue a collectible tax, it would first have to decide on its intended purpose.
“Targeting on (the) energy sector, to me, is a bit odd, unless the government desperately needs more funding,” he said.
Given that government revenue has increased due to high inflation, Askari said the case for further funding is unlikely. Another concern, he said, is that oil and gas companies could pass these additional taxes on to consumers through higher prices.
However, despite disagreement among economists on this policy, the poll found a majority of Canadians support taxing unusually high-profit businesses during the recession. epidemic. A poll conducted by Abacus Data on behalf of the Broadbent Institute and the Canadian Institute of Public Service in July 2021 found that 87% of Canadians support the policy.
The survey was conducted online with 1,500 Canadian adults between July 13 and 19, 2021. It cannot be biased because online polls are not considered a truly random sample.
Blaikie said the NDP is counting on public support to convince the Liberal Party of the policy.
“I think the more Canadians out there calling for these measures with us in the NDP, the more likely we are to see a positive outcome.”
This report by the Canadian Press was first published on September 18, 2022.