Kevin O'Leary nails it.

[firebug]

Originally Posted by Zarley

This example is fine and I agree with you that the change is not going to have a material impact on very many projects on a micro level. Projects that had a positive NPV previously aren't going to become uneconomic all of the sudden solely due to the corporate tax increase.

However, I think you need to be looking at this at a macro level from a capital budgeting perspective. Companies operating across multiple jurisdictions have limited capital to invest and a multitude of potential projects to invest in. The 2% (or should I say 0.3 percentage point ) decrease in IRR in your example may not seem like a lot, but it will cause Alberta based projects to move down the pecking order on many priority lists. While the change may seem immaterial to you, it undeniably will have an impact on investment inflows to Alberta.

Absolutely, in aggregate it will have an effect. Now is that affect material? I don't think so (although millions does sound so big).

However, I also have to view this question as a citizen of Alberta. After all, my kids attend alberta schools, when I'm sick I go to an Alberta Hospital, I drive on alberta roads and Alberta courts help protect my property rights. Is 12% a more optimal corporate tax rate than 10% was, I really don't know. But I'm pretty comfortable in thinking that the impact of the change is being blown far out of proportion.

On another note, royalty review. These are actually far more material to corporate budgeting issues than the corporate tax rate. What confuses me is that industry is failing to take advantage of these low prices to renegotiate these in an environment that will be more sympathetic to them. A royalty review now doesn't scare me (in fact the sooner the better) an NDP royalty review at $100 WTI and $5 AECO is what would really make me terrified. Industry and conservative pundits trying to delay this run the risk of having that delay bite them badly in the ass.

[OMG!WTF!]

Originally Posted by firebug

On another note, royalty review. These are actually far more material to corporate budgeting issues than the corporate tax rate. What confuses me is that industry is failing to take advantage of these low prices to renegotiate these in an environment that will be more sympathetic to them. A royalty review now doesn't scare me (in fact the sooner the better) an NDP royalty review at $100 WTI and $5 AECO is what would really make me terrified. Industry and conservative pundits trying to delay this run the risk of having that delay bite them badly in the ass.

I don't think industry has much say in the review outcome. And the NDP is most definitely planning for $100 oil as much as they are the current price. The thing that bugs me most is that it really doesn't matter to the NDP what is happening with oil prices or the economy in general. They're going to do what they do in any condition. This is from their platform....

the people of Alberta as a whole are deprived of much of the benefit of our own resources....Through these policies, we’ll implement competitive, realistic royalty rates as prices rise, to ensure full and fair value for Albertans as the owners of the resources

So the idea that any of this is up for discussion is not reality. They want more money and that's about it.

[rubecube]

Originally Posted by Frequitude

Come on rubecube, do you really think its absurd to suggest that increasing spending more than increasing revenue is a dumb move when we were already spending too much and collecting too little?

When you have the infrastructure deficit that Alberta does? Not really. And if you're a Keynesian, now would be the time to run deficits.

FTR, on the surface I am of the belief that the current state of the federal economy is not indicative of failed CPC policies. I think the CPC have a pretty good track record relative to the economic environment. We were on pace for a balanced budget and things were looking good until this recent recession. But I'm open to debate that. What failed policies resulted in this?

We were on pace for a balance budget in name only. Dipping into contingency funds and EI to balance the budget isn't actually balancing it. And this ignores the eight previous deficits they've run, which isn't something I particularly care about, but it does seem that you do from what you wrote above.

Correlation is not causation. To ignore the policies and only judge the results is a poor approach.

But that's my point. We're seeing that things aren't going to get better soon and trying to attribute it to companies fleeing because of NDP policies. Someone needs to actually demonstrate that there's a causal link and so far I haven't seen anything convincing.

I've given some NDP policies and justified why I think they're directionally bad. I'm open to debate if they're bad. Let's stack them up against some CPC policies and debate why they are bad. Then someone like myself can maybe understand "hmm good point, I am holding a double standard."

Oh boy, where do I start? I don't have a problem with deficit spending, but when you're doing it to spend on bad social policies, misleading advertising, corporate tax cuts, and boutique tax credits that do nothing to stimulate the economy, it comes across as fairly wasteful.

[GGG]

Originally Posted by rubecube

Explain?

It cuts off a huge source of investment dollars from juniors and mid level players. And the capital that would be invested by these entities is invested elsewhere in the world competing directly with us.

[the_only_turek_fan]

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.

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%?

[rubecube]

Originally Posted by the_only_turek_fan

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%?

Or let's go the other way and tax 5% or nothing at all?! Trickle down, baby!!!

[Aleks]

Originally Posted by Frequitude

This is inaccurate. Prentice's budget included various revenue increases.

1) Abolished flat tax in favor of a progressive system
2) Healthcare levy
3) Gas tax
4) Sin taxes (smokes and booze)
5) Various fee increases (camping, mariage certificates, traffic fines, etc.)

So I guess my question is, why is it ok for me to pay more for all of that then? I sure don't boast about profits in the billions. I guess I'll hold my hat out too and claim poor

[Vinny01]

Originally Posted by Frequitude

Nobody blames the NDP for the current meltdown and resulting deficits. What PC/WRP supporters are angry at them about is that the changes they brought in or proposed have a high probability of making things directionally worse.

Stop being obtuse. It makes it difficult to converse or debate with you. Which is a shame because its a good opportunity to have these sorts of debates in here with people like yourself who are on the opposite side of the table as me.

When I look at my Facebook feed it is littered with posts, memes, and articles that are 100% blaming the NDP for the current state of our economy specifically the O&G sector.

[dino7c]

Originally Posted by Vinny01

When I look at my Facebook feed it is littered with posts, memes, and articles that are 100% blaming the NDP for the current state of our economy specifically the O&G sector.

to be fair I am seeing the same things about Harper, mostly highly misleading. Social media is good for getting people out to vote I guess...but not so sure thats a good thing when people are taking these memes as fact

[the_only_turek_fan]

Originally Posted by rubecube

Or let's go the other way and tax 5% or nothing at all?! Trickle down, baby!!!

Dude, I am trying to have an actual debate on this.

How can the gov. make it has easy as possible for businesses to start up, and for businesses to relocate to AB?

The Canadian people would not tolerate blowing up the Rand forula.

How else are you going to compete with the 24 right to work jurisdictions in the United States? What about Mexico?

If a company comes to Alberta and set's up shop and creates jobs that are here in AB, as a tax payer I would be OK with that business not paying corporate tax because to me the jobs created far outweigh having a corporate tax and less jobs.

[Senator Clay Davis]

Competing with the "right to work" States and Mexico means accepting lower wages for jobs. That's what has happened in every right to work state, and obviously Mexico is Mexico. So yes, there's jobs, but they pay less and with the cost of living highly unlikely to ever go down, that just means people have to accept a lower standard of living, or work 2 (or more) jobs. That really doesn't sound all that great does it?

[polak]

Originally Posted by the_only_turek_fan

Dude, I am trying to have an actual debate on this.

How can the gov. make it has easy as possible for businesses to start up, and for businesses to relocate to AB?

The Canadian people would not tolerate blowing up the Rand forula.

How else are you going to compete with the 24 right to work jurisdictions in the United States? What about Mexico?

If a company comes to Alberta and set's up shop and creates jobs that are here in AB, as a tax payer I would be OK with that business not paying corporate tax because to me the jobs created far outweigh having a corporate tax and less jobs.

Except most of the business in this province is here for a limited time and pulling out a finite resource of ours. What happens when it's gone and you haven't taken a cut?

I'd be fine with some sort of tiered system where resource extraction is taxed more than other corporations.

[Flacker]

Originally Posted by polak

Except most of the business in this province is here for a limited time and pulling out a finite resource of ours. What happens when it's gone and you haven't taken a cut?

I'd be fine with some sort of tiered system where resource extraction is taxed more than other corporations.

Imperial Oil has been drilling in Alberta since 1946, and hit with Leduc One in 1947, and has been a massive contributor to our economy during that time. It is just a matter of days before they pull the plug, we better stick it to them!!

[the_only_turek_fan]

Originally Posted by Senator Clay Davis

Competing with the "right to work" States and Mexico means accepting lower wages for jobs. That's what has happened in every right to work state, and obviously Mexico is Mexico. So yes, there's jobs, but they pay less and with the cost of living highly unlikely to ever go down, that just means people have to accept a lower standard of living, or work 2 (or more) jobs. That really doesn't sound all that great does it?

Do you have a better idea?

As I said earlier, we can't blow up the Rand formula.

BUT, why not we try and cut every OTHER tax/expense that businesses have in order to create jobs/keep jobs in AB.

[the_only_turek_fan]

Originally Posted by polak

Except most of the business in this province is here for a limited time and pulling out a finite resource of ours. What happens when it's gone and you haven't taken a cut?

I'd be fine with some sort of tiered system where resource extraction is taxed more than other corporations.

I am not talking about just oil.

[peter12]

Originally Posted by the_only_turek_fan

Do you have a better idea?

As I said earlier, we can't blow up the Rand formula.

BUT, why not we try and cut every OTHER tax/expense that businesses have in order to create jobs/keep jobs in AB.

I completely agree. At this stage, the absolute gutting of the American union, the rise of cheap, easily implemented technology, and the rise of Mexico means that Canada must do what it can to remain competitive. Otherwise, wages will eventually fall.

A job is a better source of income than a tax redistribution.

[peter12]

Great article. There is very little growth in inequality in the bottom 99%, except for the rise of the threshold earner. I think that there is clearly a community divide in CP regarding this new worker.

http://www.the-american-interest.com...-that-matters/

[polak]

Originally Posted by Flacker

Imperial Oil has been drilling in Alberta since 1946, and hit with Leduc One in 1947, and has been a massive contributor to our economy during that time. It is just a matter of days before they pull the plug, we better stick it to them!!

Yes well if you're thinking about you and yourself only then you're probably fine. Go nuts, no tax. Screw your kids or your grandkids, they can figure it out.

[Flacker]

Originally Posted by polak

Yes well if you're thinking about you and yourself only then you're probably fine. Go nuts, no tax. Screw your kids or your grandkids, they can figure it out.

Yes, they will be far better off when they have to live in BC or Saskatchewan to get an O&G job. There is no cartel in western Canada, we can't just set our own rates without consequences.

If you think the demand for oil, and oil related products (plastics, rubber, etc.) is gone in two generations that is a pretty obtuse view. And our reserves certainly won't be extinguished in the next two generations (50-60 years).

[Senator Clay Davis]

Originally Posted by the_only_turek_fan

Do you have a better idea?

As I said earlier, we can't blow up the Rand formula.

BUT, why not we try and cut every OTHER tax/expense that businesses have in order to create jobs/keep jobs in AB.

But there's no guarantee cutting taxes will mean more jobs. Companies can of course hoard that money, or pay it out to shareholders instead. It's not like Alberta has the highest corporate tax rate in the country either, it's one of the lowest in Canada even after the increase. Alberta also has a good established talent pool of workers, and no PST which can only help. It should in theory be more attractive than almost anywhere in Canada to start up a business. To me the minimum wage going to $15 would be a bigger issue to deterring business investment than the 2% incremental increase in corporate tax.

As to a better idea, I mean there's no one idea. I mentioned that low paying jobs aren't sustainable in an environment where cost of living is rising....so how do we reduce cost of living? If we did that those types of jobs could be more acceptable because they can provide a decent standard of living. But trying to reduce cost of living is a big task to undertake.