Quote:
Originally Posted by firebug
First off, remember that he answers to his shareholders and not to citizens of the province but, he wants to win the Hearts and Minds ™ of Albertans to pressure the government to benefit his owners at the citizen’s expense.
Frankly, I wish I could parse what he is trying to say but a tax accountant would be a much better choice to try and make sense of it. Do I believe that the tax change caused an increase in his deferred tax position, absolutely. Do I think that all 579mm was due to it, not a chance (or at least I’m very skeptical). The change is only 2% of his earnings before taxes so if that 2% is equal to $579mm that means that somewhere there is nearly $30B of profits sheltered, and if so, that $579 is then really quite immaterial.
I’d like to see these guys put their money where their mouth is. Tell me, as a citizen, how much extra you will invest in AB next year if we let you pay 10% instead of 12%. Tell me how many employees you will hire back (and let us audit it). The truth IMHO is that those numbers will be embarrassingly small. They are not investing (and laying off staff) because of commodity prices not because of a piddly change to provincial corporate tax rate. However railing at the international commodity trading community isn’t going to score him the points that pissing at the government will. Again, I’ve reviewed the projects at my firm and getting that 2% back will not give any of them a green light (I’d pay 15% provincial tax if they could get me $4 aeco and $65 WTI ;-).
How can you pay taxes when you have zero profits? Easy, let’s go back to our Personal Tax example… you’ve now retired and have no income so you withdraw 100K from your RRSP’s on which you pay $25k in 'income taxes' (even though your income is zero). Remember in corporate accounting there is a big difference between ‘cash basis’ and ‘accrued basis’ and that is what the deferred tax line is trying to bridge.
As for your 4-year paranoia… government’s get far too much credit when things go well and far too much blame when things go poorly. AB’s fiscal position in 4 yrs will be 95% dependent on the commodity markets and 5% on government action so start directing your fear in the proper direction so you can deal with it properly.
I’m not an uninvolved bystander either. I work in E&P and did not vote NDP in the provincial election. I suspect that my probability of becoming unemployed in the next twelve months is approaching 100%. But I recognized the volatile nature of the industry I was in and took steps to insulate myself from suffering when things inevitably turn bad. You should do the same, you’ll sleep much better.
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Whether the tax is paid now, or later, the fact is it takes money out of cash flow for future projects. Can they pay the tax later when commodity prices increase? Sure. I guess I can concede that point. But who knows when that will happen.
My entire point of all of this is to say that it is stupid to take money out of corporate profits when the prices are this low. Whether it's a small amount or a larger amount, it is bad policy, IMO.
If 12% is no big deal, why not 15%? Maybe go for 17%?