Harper government considers new LNG tax breaks in federal budget

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This information has come to light as a result of internal records obtained by Reuters through an Access to Information request.

The purpose of new tax breaks – proposed by the Canadian Association of Petroleum Producers (CAPP) – is to give incentive to companies that have stalled LNG development in the midst of falling oil prices, says Reuters.

The report says the tax breaks would reclassify LNG export plants as manufacturing assets. Under its current classification, LNG facilities can writes off 8 per cent of their total capital investment each year, whereas under the new proposal, they’d be authorized to write off 30 – 50 per cent of capital investment per year.

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The classification of manufacturing assets has been in place since 2007, and the document obtained by Reuters was prepared ahead of a meeting with industry representatives last October.

Companies have long complained that LNG development cost is too high while the profit margin is too thin, according to Reuters.

This proposal has been made, and denied, during the last two federal budgets, and the next one is due in April 2015.

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If implemented, Reuters says the proposed measure would have the federal government lose “hundreds of millions of dollars” in tax revenue.

CAPP estimates approximately $3 billion would be added to Canada’s GDP over 20 years if the proposal is approved, says Reuters.

However, the report says it’s still unclear whether this incentive would be enough of a push for companies to break ground on LNG development while the market remains unstable.

The NEB has so far approved 10 LNG export licences, and has another 10 applications to go through – none of which have made a final investment decision.

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