VANCOUVER, B.C. – A new study by the Fraser Institute finds B.C. has one of the highest tax rates on new investments in the natural gas sector among all major energy-producing jurisdictions in North America, which is harming the province’s competitiveness.
“Developing B.C.’s natural gas resources has been a priority for successive provincial governments, and yet its tax rate on new natural gas investments is highly uncompetitive with neighbouring and competing jurisdictions,” said Jack Mintz, President’s Fellow at the University of Calgary’s School of Public Policy.
The federal government last year introduced a series of temporary measures designed to incentivize new investment. In response to recent tax changes in the U.S., which eroded Canada’s previous corporate and investment tax advantage over American states, shared the study
According to the study that even with Ottawa’s tax changes, B.C. still has the second-highest effective tax rate on new investments in the natural gas sector. The study’s calculations include everything from corporate income taxes to royalty payments to provincial sales taxes if they apply.
“This is a comprehensive assessment of the tax rate that applies to businesses wishing to invest in the oil or natural gas sectors,” said Philip Bazel, associate at the University of Calgary’s School of Public Policy and study co-author.
B.C.’s tax rate on new natural gas investments in 2018 was 31.9 percent—behind only Saskatchewan (36.6) in Canada, and fifth-highest among all major energy-producing jurisdictions in North America. B.C.’s tax rate on new natural gas investments is nearly five percentage points higher than the Canadian average (27 percent) according to the study.
“If the B.C. government really wants to grow and develop the province’s natural gas sector, policymakers should consider tax reforms to incentive new investments in the industry,” Mintz said.