Now, as to the definition of subsidies. And various stuff.
I am familiar with various (non) "authorities" decrying massive tax subsidies to resource companies. I am a retired accountant and had to deal with various of the "subsidies" over a forty odd (some very odd) year career.
I absolutely agree that, as with many Canadian businesses, the resource sector does receive subsidies. I won't bore you (really, it would be boring!) with various considerations, blah, blah, blah. I would simply request that any reader consider whether, in calculating taxable income a company should be able to deduct ALL the costs that it incurs to earn or gain revenue.
Put differently, if a company needs to pay, say, $1,000 to drill an oil well (a bargain amount, to be sure!), should that $1,000 be an immediate deduction or should it be deducted over time or should it never be deductible? Consider that question and a large part of the complexity of taxation of not only the resource industry but also any other business in Canada becomes more clear.
My point is that clearly there are subsidies that businesses of all types might have available to them. Before folks argue that subsidies per se are good or bad it is necessary to understand them. So, are subsidies to encourage climate this, that or the other good or bad? My answer is yes and yes and no and no. It is a complex area and I applaud you for tackling the it.
The complicated nature of a company that uses a public and finite resource is worth thinking about. You can make an argument that companies who get private benefit from oil reserves, mines, forests, etc could possibly benefit from the resource being under priced. There is a difference between renewable resources and finite ones. I'm not an accountant. But I would imagine it quite complicated to determine if these prices have been set to maximize the value for the public.
I don't really understand why our taxes allow deductions for business expenses. I think it would be much simpler to tax revenue but at a lower rate. Then a business has less conflicting incentives. Keep costs low, because you can't use an expense to offset taxes.
Also, we do need to consider the problem of extractive industries and delayed costs. There are costs incurred for environmental cleanup after extraction and for the impact of fossil fuels to our climate. The nature of these costs is that they become known after the activity is over, so how can you price them into the activity? I think that there should be cash (not insurance premiums or other hypothetical guarantees) that are set aside to pay for damage to lands, environment and climate. If the costs of cleanup are less than what is set aside, that money goes back to the company. That incentives the company to keep the damage of their activity to a minimum.
Last point is around the economic impact of any company. Of course, we do need employers. However, to give a company credit for their economic impact is interesting. I think you could flip it to say, these workers have contributed their time and labour to help the shareholders of Strathcona make a profit. There seems to be this odd credit given to companies because they employ people, as if they were doing it for charitable purposes, as opposed to profiting from that labour. It's like a myth we all believe, even though we also talk endlessly about the market.
David, I am uncertain if this is an oops or is deliberate.
Two paragraphs below the definition of a tax expenditure you start "Strathcona's 2023 Annual Report ...", the latter two words being underlined and obviously a hyperlink. When I followed that link it took me to the Canada Growth Fund annual report, not that of Strathcona so I could not see the reference to the loan liability.
As I say, I am uncertain if this is deliberate or an oops so I wanted to bring it to your attention.
Now, as to the definition of subsidies. And various stuff.
I am familiar with various (non) "authorities" decrying massive tax subsidies to resource companies. I am a retired accountant and had to deal with various of the "subsidies" over a forty odd (some very odd) year career.
I absolutely agree that, as with many Canadian businesses, the resource sector does receive subsidies. I won't bore you (really, it would be boring!) with various considerations, blah, blah, blah. I would simply request that any reader consider whether, in calculating taxable income a company should be able to deduct ALL the costs that it incurs to earn or gain revenue.
Put differently, if a company needs to pay, say, $1,000 to drill an oil well (a bargain amount, to be sure!), should that $1,000 be an immediate deduction or should it be deducted over time or should it never be deductible? Consider that question and a large part of the complexity of taxation of not only the resource industry but also any other business in Canada becomes more clear.
My point is that clearly there are subsidies that businesses of all types might have available to them. Before folks argue that subsidies per se are good or bad it is necessary to understand them. So, are subsidies to encourage climate this, that or the other good or bad? My answer is yes and yes and no and no. It is a complex area and I applaud you for tackling the it.
The complicated nature of a company that uses a public and finite resource is worth thinking about. You can make an argument that companies who get private benefit from oil reserves, mines, forests, etc could possibly benefit from the resource being under priced. There is a difference between renewable resources and finite ones. I'm not an accountant. But I would imagine it quite complicated to determine if these prices have been set to maximize the value for the public.
I don't really understand why our taxes allow deductions for business expenses. I think it would be much simpler to tax revenue but at a lower rate. Then a business has less conflicting incentives. Keep costs low, because you can't use an expense to offset taxes.
Also, we do need to consider the problem of extractive industries and delayed costs. There are costs incurred for environmental cleanup after extraction and for the impact of fossil fuels to our climate. The nature of these costs is that they become known after the activity is over, so how can you price them into the activity? I think that there should be cash (not insurance premiums or other hypothetical guarantees) that are set aside to pay for damage to lands, environment and climate. If the costs of cleanup are less than what is set aside, that money goes back to the company. That incentives the company to keep the damage of their activity to a minimum.
Last point is around the economic impact of any company. Of course, we do need employers. However, to give a company credit for their economic impact is interesting. I think you could flip it to say, these workers have contributed their time and labour to help the shareholders of Strathcona make a profit. There seems to be this odd credit given to companies because they employ people, as if they were doing it for charitable purposes, as opposed to profiting from that labour. It's like a myth we all believe, even though we also talk endlessly about the market.
Thanks for this article!
David, I am uncertain if this is an oops or is deliberate.
Two paragraphs below the definition of a tax expenditure you start "Strathcona's 2023 Annual Report ...", the latter two words being underlined and obviously a hyperlink. When I followed that link it took me to the Canada Growth Fund annual report, not that of Strathcona so I could not see the reference to the loan liability.
As I say, I am uncertain if this is deliberate or an oops so I wanted to bring it to your attention.
That is really weird. When I load the page in my browser, the link is correct. Well, in case anyone experiences the same problem, here's the correct link to the annual report: https://d2apye5bf031b.cloudfront.net/documents/cgf-2023-annual-report.pdf