Should Canadian oil companies pay a “windfall tax” as their profits — and consumer prices — rise?

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OTTAWA — Federal New Democrats want the Liberal government to follow the European Union and impose a special “windfall profits” tax on fossil fuel companies that have reaped huge profits as Canadians face soaring inflation .

The levy should be temporary, NDP MP Peter Julian told the Star, and coincide with another NDP proposal to scrap the federal sales tax on home heating costs that are rising with rising gas prices. natural.

Last week, the EU decided to create a one-off “solidarity tax” on fossil fuel companies that have seen their profits rise by more than 20% since 2018. The bloc’s plan is to use revenues from the windfall tax – which means targeting windfall corporate profits – to help households and businesses deal with increased energy costs.

We believe the same must happen in Canada,” Julian said Tuesday.

The NDP failed to convince the Liberals to include such tax increases in the parliamentary agreement that supports Prime Minister Justin Trudeau’s minority government until 2025. But the party demanded changes anyway, arguing that the current tax system is too lax for the wealthy and big business. .

He also wants to extend a current government policy to raise the tax rate on large financial institutions by 1.5 percentage points to oil and gas companies. It is a proposal that the Liberals in power have neither ruled out nor endorsed.

At a meeting of the House of Commons Finance Committee on Monday, Julian asked Deputy Prime Minister and Finance Minister Chrystia Freeland about the NDP’s efforts to tax “excess profits” on corporations.

Freeland did not make a commitment, saying the government is “always open to new ideas”, but stressed that any new measures beyond the $4.6 billion affordability package it is now offering in the House of Commons must take into account Canada’s overall fiscal situation. And any new taxes, she said, must be “fair” and avoid slowing economic growth.

The debate comes as all parties on Parliament Hill clash over how best to address affordability concerns as Canada experiences its highest year-over-year inflation in 40 years.

Citing the rising cost of home heating, the Conservatives want the government to reverse planned increases to the federal carbon price. Currently set at $50 per tonne of greenhouse gas emissions, the floor price is expected to rise by $15 each year to reach $170 per tonne in 2030.

The NDP is also calling for a parliamentary inquiry into what it calls ‘greed flattery’ at big grocery stores, alleging big food chains are unfairly profiting from soaring prices, and slammed the government after Canadians for tax fair reported that the “tax gap” for big business – the difference between the amount they are supposed to pay in taxes and the amount they actually send to the government – has grown to $30 billion in 2021, compared to an average of $13.5 billion per year in the three years before the pandemic.

“When will this government stop standing up for the profits of the super rich, stand up for working people and close the tax loopholes for the super rich? NDP Leader Jagmeet Singh asked the Commons on Tuesday.

The government responded that it had spent more than $1 billion to strengthen tax enforcement in recent years, while Freeland pointed to government policies to raise corporate taxes on large financial institutions and impose a luxury tax on expensive cars, private planes and boats.

Calling for new taxes on big business profits is not unique to the NDP. Earlier this year, the UK created a special tax on oil and gas producers. The US government has said it is considering a similar policy.

The EU’s temporary measure comes as its members grapple with rising energy prices and a supply shortage caused by Russia’s invasion of Ukraine.

These forces have also impacted Canada and are among the factors that have pushed up gasoline and home heating costs amid soaring inflation this year. In June, for example, the Ontario Energy Board approved an increase of approximately 20% in average annual household gas bills, citing “sustained global demand for North American liquefied natural gas and uncertainty of the global energy landscape. He this month approved further increases of between 5 and 10% a year for similar reasons.

At the same time, fossil fuel companies have made huge gains. The ARC Energy Research Institute predicted this spring that Canadian oil companies could end the year with a whopping $147 billion in after-tax cash, up from about $81 billion in 2021. Individual companies saw their profits increase this year, including oil giant Suncor, which saw profits quadruple in the first quarter from the first three months of 2021 to $2.95 billion.

The Canadian Association of Petroleum Producers argues that there is no need for a tax in Canada that targets these profits. The association says regulations built into provincial royalty regimes already serve to funnel more money into government coffers when the cost of energy rises. In the oil sands of Alberta, for example, the royalty rate goes from 25% when the price per barrel of oil is $60 to a maximum of 40% when the price per barrel is $120.

The price on Tuesday afternoon was around $116.

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