Economics Professor “Shocked” by LNG Tax Rate
Prince George, B.C. – Victoria’s newly announced 3.5% LNG tax rate (just 1.5% while start-up costs are paid) came as a surprise to UNBC economics professor Dr. Paul Bowles this week.
“I was quite shocked to see the headline tax rate being essentially cut in half. You’ll recall that the budget that was brought down in February suggested that the tax rate on LNG would be about 7%.”
Victoria says the change was made necessary by increased construction costs and declining LNG selling prices but Bowles says there may have been another reason at play.
“We’ve also seen a fairly aggressive lobbying by business to cut the tax (Petronas). So it’s hard to know if the tax reduction is due to changing conditions or industry lobbying.”
He says the change will also have implications for BC taxpayers noting the “prospects for the $100 billion prosperity fund are pretty much out the window now.”
As for whether or not the lower rate will attract enough business Bowles says taxation is just one issue businesses consider.
“Price differential between North America and Asia will be another one. Certainly construction costs is one and also the whole issue of pipelines and aboriginal title is another. You wouldn’t want to say this (tax rate) alone is going to stimulate the investment – it depends on a whole number of factors.”
Bowles says it would be a fair assessment to say he’s skeptical that LNG alone will be the panacea the province once promised it would be.
“It’s very likely been oversold. You look at the announcement in February and the revenue and employment projections made then. Already we’ve seen a big backing away from that with the reduction in taxes meaning revenues will likely be much less. So do I think it would be a mistake to say LNG is going to save the entire province? Yes.”
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“We’ve also seen a fairly aggressive lobbying by business to cut the tax (Petronas). So it’s hard to know if the tax reduction is due to changing conditions or industry lobbying.”
Does it matter? Point is, Christy is prepared to bend over and smile while the province gets robbed of our assets once again.
KRUSTY the saviour of our province. LNG to lead us into prosperity and the promised land, ya right. ONE AND A HALF CENT RETURN FOR EVERY BUCK EARNED, for 4 years then raised a whopping 3.5 cents for every buck eventually up to 5 cents. REMINDS me of an old cowboy song; JUST GIVE IT AWAY, THERE AINT NOTHIN IN THIS PROVINCE WORTH FIGHTING OVER, JUST GIVE IT AWAY!
What’s the difference – 7% or 1.5% of nothing still equals zero.
Every time a consumer purchases goods or services the consumer gets hit with a 12% tax. The Libs tried to stick it to the people of BC with their HST tax grab a few years ago. Even when rescinded the Libs still kept in place the extra 5% tax on private auto sales. A pretty good cash cow in itself.
Can we expect anything else but a give away of resources by the Libs to the companies that fill their coffers at election time.
If saving 3.5% in taxes for the companies proposing to liquefy and sell natural gas is a make or break deal then it is not going to be a very profitable undertaking at best.
Excuse me for sounding ignorant but how do the royalties stack up? Are they high, low, just right or what? I would agree, that on the face of it, it does seem like a give away, with very little benefit. I would have to base my final conclusion on what the gov (notice I didn’t say citizens of BC)receives once the resource leaves the ground. Do they call it, “at the well-head” for LNG? Anyways you get the point.
Good point 1% or 7%, the gong show still adds up to zip.How about a little attention to the industries and business operating today.
How many times already have we been sold this same old dogma that some new found resource is about to be the ticket to our economic nirvana if only we can get enough of it on the global market cheaper than anyone else anywhere else can?
Lets see now, Northeast coal in conjunction with Crows Nest Pass coal comes immediately to mind. But there was also molybdenum, copper concentrates, pulp chips, pulp and paper, OSB, sulfur, hydro-electicity, dimension lumber, J-grade lumber, low grade lumber, raw logs, un-liquified natural gas, and maybe a number of others.
And even at one time, ‘hype’ itself. That was way back in the ’80’s, when the BC Liberals were still operating in disguise under the Social Credit ‘Party’ moniker. Back then we were even going to have a “high-tech, value-added” future. Whatever happened to that?
How did any of those things really pan out in paying down the Provincial debt, paying down business and personal debt, and providing growth without an exponential increase in overall debt greater than what would have been necessary to actually fund that growth itself?
Not very bloody well, I’d say.
Isn’t it long past time that we reminded those who govern us that there is a very big difference between ‘inflation’ ~ where almost everyone gets to feel good, for awhile, because we get to play with bigger figures that have a dollar sign in front of them ; and ‘prosperity’ ~ where our STANDARD of living actually is increasing while our COST of living is actually falling? That’s NOT what we’ve had, nor what we’re going to get. Our living standard, for most of us, even though it may be a continually shrinking majority, may well be rising. But our cost of living is rising ever FASTER, and there’s no way the current course this government is on is going to reverse that. Continue like this and they won’t have to worry about the hapless NDP defeating them, they’ll defeat themselves.
Wow is all I can say. ….you all voted for this known liar. ..did you all think that they actually care about Joe public. …
Nothing like a good LNG story to bring all the naysayers and the anti-everything crowd out of the woodwork.
For that economics professor, he might be shocked to hear that LNG is turning into a buyers market and there is something called negotiations. Evolution of the market.
We might be shocked about that professors pay and benifits.
Just a little reminder: If we had better dips few would have chosen the libs.
The Malaysian state company Petronas warned in May “Let’s not slaughter the [LNG] goose before it even has a chance to hatch the golden egg”. He was quite vocal when he said that if the Feb tax plan announced for LNG are not slashed, it will pull out its $10+ Billion investment in BC. Petronas CEO Shamsul Abbas told that he is “ready to call off” the Pacific NorthWest LNG project amid a delayed regulatory approval process, plans by the B.C. government to impose an LNG tax and a “lack of appropriate incentives.”
The risk of investment in BC LNG is still very high and there is already lots of competition. Petronas is not fully invested yet and it can leave if the risks increase. According to CEO Abbas Canada is 40 years behind the game.
Socredible, what do you think we (the government) should do? Leave the natural gas in the ground and wait for better, more profitable times?
Is that what the NDP would do? I doubt it.
It would be nice to see an economic analysis of the future impact of this multi Billion LNG BC project on PG population and house prices, considering that the cities in the West will benefit from its economic boom and their population, employment and house prices will further rise.
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