A major oil company has filed a proposal with the province to get a big oil tax break in exchange for the ability to ship its products to Canada.
The proposed new system would allow companies to deduct all the taxes they pay on their Canadian operations, while still paying a lower rate than a U.S. company.
The proposal is expected to be approved in early 2019, when the new rules are due to come into effect.
The province will decide if it’s a good deal for the industry or not in 2019, said Mark Boulle, president of Calgary-based B.C. Energy, which has the world’s largest oil sands reserves.
He said the new system, which the company hopes to implement soon, will help the industry “keep pace” with a rapidly changing climate.
But Boullet said he was concerned about the impact on the Canadian economy.
He and other experts warn that the new tax could increase the cost of doing business for the average Canadian, who has to pay higher prices for goods that come into the country.
In 2019, oil sands producers will be able to deduct the tax from their gross profits of up to $10 million, a move that’s designed to make the oil sands more competitive with oil sands-heavy rivals like Alberta’s oilsands.
It would also give them a leg up on competitors in developing countries, including the United States.
The new system will be designed to give producers the ability, by 2018, to deduct as much as 10 per cent of their Canadian output as a business expense.
It will also include a new tax credit that would give the oil and gas industry an extra $1,000 a year in royalties, a subsidy it says is needed to encourage new production and the development of new markets.
Alberta is expected take advantage of the new incentives when it re-opens the oilfields in 2019.
Boullete said the incentives could be a boon for the oil industry, but added they could also cause an economic blow to the province’s already struggling economy.
“If we’re not able to make a reasonable business case that this is something we should be doing, then we don’t think this is a good thing,” he said.
“There’s a very real possibility that if we don.t do this we’ll just get caught up in an economic malaise that could really hurt the province.”