Oil sector must contribute, say advocates of one-time tax

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Oil sector must contribute, say advocates of one-time tax

Economists call for oil and gas companies to be used to fight inflation.

Governments face strong global pressure to impose, exceptionally, some large corporations that have posted record profits since the start of the COVID-19 pandemic. This is the case for many companies in the oil and gas sectors.

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 corporations increased 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.

Also, 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.< /p>

Mr. Macdonald supports the imposition of a one-time tax to address this imbalance.

Advocates of a windfall tax for Canada's oil and gas sectors can look abroad to defend their position.

The European Commission has proposed putting put in place 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 (185 billion Canadian dollars) for member states.

The European Union is not the only jurisdiction trying to get a bigger 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 demands that oil and gas companies be used to fight inflation.

In Canada, the NDP calls 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 struggling with inflation.

The NDP welcomed the commitment of the federal government which announced on Tuesday that it would double the GST rebate for a period of six months. 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 will keep pushing, he says. One can be optimistic because of the announcement on the GST refund. So even if the government is wrong, we can put it back on track.

The Ministry of Finance declines to comment on this.

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 unique situation of the nation. continent where energy prices have risen dramatically.

We don't face the same situation here, points out Mr. Smart. It is not justified here.

It also points out that it is difficult to implement a one-time tax. This means should be used sparingly, according to him.

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 purpose .

Targeting the energy sector sounds weird to me, unless you're desperate for the money to the government, he says.

And since government revenues are rising thanks to inflation, it doesn't need to extra money, says Mr. 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 suggest that Canadians support the the idea of ‚Äč‚Äčtaxing even more companies that have made high profits during the pandemic. For example, 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 13-19, 2021.

Mr. Blaikie says the NDP is counting on the support of the public to convince the Liberals of the merits of a one-time tax for oil and gas companies.

More Canadians side with the NDP to demand this kind of measure, the higher the chances of a positive result.

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