Kevin O'Leary nails it.

[Jacks]

Originally Posted by Red

Only the high earners and corporations pay less taxes here than elsewhere. Lower wage earners actually pay more than some other provinces because of our low tax exemptions. But since we've had the same PC government all these years that fact was never advertised like "alberta advantage" and "lowest taxes". You took their bait.

As per http://www.cra-arc.gc.ca
Personal exemptions
AB - $17,787.00
BC - $9,869.00
MB - $9,134.00
NB - $9,472.00
NF - $8,578.00
NS - $8,481.00
ON - $9,670.00
PEI - $7,708.00
QB - $11,425.00
SK - $15,378.00

[Red]

Originally Posted by Jacks

As per http://www.cra-arc.gc.ca
Personal exemptions
AB - $17,787.00
BC - $9,869.00
MB - $9,134.00
NB - $9,472.00
NF - $8,578.00
NS - $8,481.00
ON - $9,670.00
PEI - $7,708.00
QB - $11,425.00
SK - $15,378.00

My mistake, not exemptions but bracket rates for lower earners vs our flat 10%.
Point stands, lower earners in Alberta are not least taxed.

http://www.cra-arc.gc.ca/tx/ndvdls/fq/txrts-eng.html

[firebug]

Originally Posted by the_only_turek_fan

So please explain how the $579 is an accounting gimmick?

And....to my point, will the 2% increase in corporate taxes result in less money for CNRL in this quarter or any future quarters?

Because it leads to you (and lots in the media) thinking this is a cash expense.

Look at their Q2 cash flow statement. What did you see? Right, they added back the deferred tax expense and end up with cash from operations of 1,285MM for the quarter. That means they didn't actually pay any of that right now but are letting investors know that over time (and assuming nothing changes) that will have to pay more taxes.

Last year they only paid $700 million in taxes in North America and let's assume that it was all in AB. Now lets raise this by 20% so the new value is 840MM. 140MM is a lot of money, but it is on over $5,000MM in pre-tax Profits (taxes would go from 14 to 16.8% of profits; 2.8% extra).

$579MM seems like a lot (and it is) but measuring it against 1 qtr of performance is the gimmick. In reality it reflects impact over a much greater amount of time and over a much larger value of revenues and profits.

Let's say you are the avg albertan with 1,000,000 in RRSPs. While individuals don't account for it this way, your personal 'balance sheet' would show the RRSP's on the asset side but on the liability side you would show a deferred tax liability, because when you withdraw them, you owe the gov't the taxes on them at whatever the future rate is.

So lets say you make some calculations and determine that at your forecast withdrawal rate you'll pay an average rate of 25% so on your personal Balance Sheet you'd show a Deferred tax liability of $250,000 (or more likely the PV of $250k). Now lets pretend that the Gov't increases the personal tax rate by 20% so you need to make a new deferred tax estimate on your next balance sheet which works out to 50k increase (or rather the PV of it). Your quarterly income statement would show that expense recognized now, even though the impact is far into the future and could make you show a loss even though the cash impact is zero right now.

Of course you'll be bitter at the gov't and may need to make some changes to your latte habit, but you are not going to have the house foreclosed upon.

I recognize corporate taxes are much more convoluted than my personal tax example, but my point is to show that how liabilities get accrued can cause lots of confusion when looking at them on a quarterly statement.

[IliketoPuck]

Originally Posted by PeteMoss

Are we really pretending these layoffs are due to the NDP and not due to value of oil dropping and not rallying in the past few months?

NDP is more socialist than the Conservatives - but they are not some ultra socialist fringe part.

I don't think people are naive enough to blame the current state of affairs entirely on the NDP. The price of oil is outside of their control.

My view is that the NDP has not done an acceptable job of supporting our province's main economic engine during a historically bad period, choosing instead to inject increased taxes and royalty uncertainty into the economy, which is compounding an already grim macroeconomic picture.

[Handsome B. Wonderful]

Originally Posted by polak

The global economy was fine while the PC's squandered every last penny of Alberta's 15 years of prosperity. But yeah, vote for them. They clearly know what they're doing.

Well you better get that time machine working so you can fix the past 15 years because it sounds like it's a key issue to the NDP and its supporters.

Keep focusing on the past. Whatever it takes to avoid admitting you have no plan to fix the present.

[Regorium]

Originally Posted by Red

My mistake, not exemptions but bracket rates for lower earners vs our flat 10%.
Point stands, lower earners in Alberta are not least taxed.

http://www.cra-arc.gc.ca/tx/ndvdls/fq/txrts-eng.html

Everyone knows that other provinces have progressive tax brackets. I thought you were making a point about personal exemptions.

For income tax, there are several provinces where Alberta is objectively better in basically all cases (including the $8000 extra personal exemption): Saskatchewan, Manitoba, New Brunswick, Nova Scotia, PEI, Quebec.

There's a couple provinces in which low income Albertans would be taxed less: Newfoundland, Ontario, BC, and all three territories.

We're in the upper third for the provinces, and in the middle if we include the territories. We also have 0% PST. Remember that PST is an after-tax expense and it's a regressive taxation scheme (hurts low income earners the most).

The point is that we're not that far out of line for low earners, and best in class for high earners. If we include the fact that we have 0% PST, we are best in class in all cases.

That's the Alberta Advantage which we've enjoyed at the expense of using up our oil revenue.

[polak]

Originally Posted by Handsome B. Wonderful

Well you better get that time machine working so you can fix the past 15 years because it sounds like it's a key issue to the NDP and its supporters.

Keep focusing on the past. Whatever it takes to avoid admitting you have no plan to fix the present.

lol this is the best. Saying "you" like I'm an NDP cabinet member.

I don't give a sh*t which party is in power. I want what is best for the province and I've already said that I'm not pleased with how the NDP is handling this, admittedly sh*tty, hand they've been dealt.

That doesn't mean I would have voted differently if you gave me a chance to change my vote now. Their policies and agenda were the most inline with what I believe is best for the province. This maintained oil price crash obviously changes the situation and the NDP could have reacted better but no one was running a platform of "Fixing the incoming oil crash". You have no idea if any other party would have handled this better and the past you're telling me to ignore screams that the PC's would definitely not be who you want handling this mess.

You're just relishing this opportunity to jump all over the NDP because they were the unfortunate ones left holding this bag and you have a vendetta against them but the reality is that everything would be exactly the same if any other party won. No one has a plan or is suggesting a plan to fix the present besides "hope and pray". The only "plan" that existed, the Heritage fund, was destroyed by the PC's.

[jammies]

Was there an ongoing kafuffle back in 2009 when the PCs did a review right after the 2008 economic meltdown? I don't recall any such, which seems odd considering the circumstances are very similar, except for that was the PCs, who misgoverned for 40 years, and not the NDP, who haven't yet had their opportunity to misgovern.

[Volas]

Originally Posted by firebug

Because it leads to you (and lots in the media) thinking this is a cash expense.

Look at their Q2 cash flow statement. What did you see? Right, they added back the deferred tax expense and end up with cash from operations of 1,285MM for the quarter. That means they didn't actually pay any of that right now but are letting investors know that over time (and assuming nothing changes) that will have to pay more taxes.

Last year they only paid $700 million in taxes in North America and let's assume that it was all in AB. Now lets raise this by 20% so the new value is 840MM. 140MM is a lot of money, but it is on over $5,000MM in pre-tax Profits (taxes would go from 14 to 16.8% of profits; 2.8% extra).

$579MM seems like a lot (and it is) but measuring it against 1 qtr of performance is the gimmick. In reality it reflects impact over a much greater amount of time and over a much larger value of revenues and profits.

Let's say you are the avg albertan with 1,000,000 in RRSPs. While individuals don't account for it this way, your personal 'balance sheet' would show the RRSP's on the asset side but on the liability side you would show a deferred tax liability, because when you withdraw them, you owe the gov't the taxes on them at whatever the future rate is.

So lets say you make some calculations and determine that at your forecast withdrawal rate you'll pay an average rate of 25% so on your personal Balance Sheet you'd show a Deferred tax liability of $250,000 (or more likely the PV of $250k). Now lets pretend that the Gov't increases the personal tax rate by 20% so you need to make a new deferred tax estimate on your next balance sheet which works out to 50k increase (or rather the PV of it). Your quarterly income statement would show that expense recognized now, even though the impact is far into the future and could make you show a loss even though the cash impact is zero right now.

Of course you'll be bitter at the gov't and may need to make some changes to your latte habit, but you are not going to have the house foreclosed upon.

I recognize corporate taxes are much more convoluted than my personal tax example, but my point is to show that how liabilities get accrued can cause lots of confusion when looking at them on a quarterly statement.

sorry not well versed here but what kind of time period would the 579 mm be incurred over?

[Zarley]

Originally Posted by jammies

Was there an ongoing kafuffle back in 2009 when the PCs did a review right after the 2008 economic meltdown? I don't recall any such, which seems odd considering the circumstances are very similar, except for that was the PCs, who misgoverned for 40 years, and not the NDP, who haven't yet had their opportunity to misgovern.

Yes, there was a major kerfuffle that led to the ascendancy of the Wild Rose and the end of Ed Stelmach.

[Handsome B. Wonderful]

Originally Posted by polak

You're just relishing this opportunity to jump all over the NDP because they were the unfortunate ones left holding this bag and you have a vendetta against them but the reality is that everything would be exactly the same if any other party won.

False, because other parties were not running on agendas of "Let's tax everyone and everything up to the eyeballs while continuing to spend like a drunken sailor."

The NDP are left holding the bag, and they're not making a damn bit of difference despite all their promises.

[EldrickOnIce]

To be exactly correct, low income earners (under 30k) pay less taxes in Alberta because of much higher personal exemption.

[Looch City]

Originally Posted by Handsome B. Wonderful

False, because other parties were not running on agendas of "Let's tax everyone and everything up to the eyeballs while continuing to spend like a drunken sailor."

The NDP are left holding the bag, and they're not making a damn bit of difference despite all their promises.

Perhaps because they've been in power for too short of period to actually notice any change?

Did people expect to NDP to fix the economy after a week in power?

[jammies]

Originally Posted by Zarley

Yes, there was a major kerfuffle that led to the ascendancy of the Wild Rose and the end of Ed Stelmach.

On CP? Sorry, I should have been more specific. Lots of the posters commenting now were here in 2008/2009, I'm sure they'll link back to their posts at the time explaining how the province was going to go bankrupt and the oil companies and capital would all flee, which is obviously exactly what happened.

I'm amazed people want to keep this clearly flawed royalty system which, as you say, eventually toppled the PCs. Didn't they have to roll back some of their changes, so that what we have now is a bit of a mishmash of different strategies and is neither what was intended by the previous review nor what was in place before that?

[jammies]

Originally Posted by Iggy City

Did people expect to NDP to fix the economy after a week in power?

Do people actually expect the NDP to fix the economy? I certainly don't. I ust find it comical how many people expect them to do far worse than the PCs, who were vastly incompetent in every way except propaganda and populist twaddle.

[firebug]

Originally Posted by Volas

sorry not well versed here but what kind of time period would the 579 mm be incurred over?

Really tough to know (and I'm not an accountant, let alone a tax specialist).

Reduced expenditures are going to reduce pools going forward meaning an increased cash-tax rate over the near term, however, lower profits (and even losses) due to the commodity price collapse are going to push back cash taxes.

Over time, cash taxes paid should equal the combined provincial & federal corporate tax rates (now 27%) so we could take a look at the change in tax rates, 2%, into the change in deferred taxes, $579MM which would tell me that it is equal to tax impact on the profits in Alberta of $28.95 billion (579/.02). In my opinion, the question is how long will it take CNRL to earn $29B in alberta... at current commodity prices... a very long time.

I'm sure an accountant would give you a much better answer (I certainly wouldn't consider this an accurate assessment - just my first swipe at it).

EDIT:
Looking back over the past 3 years, CNRL had GLOBAL earnings before taxes of $8.1B (8.1/3=$2.7B/yr) so assuming those profits remain flat (LOL) and are earned entirely in alberta (LOL) it would take them just over 10 years (28.95/2.7) to pay an extra $579MM in taxes. [if EBT holds flat at Q2-2015 levels, it will take a little over 60 years to pay an extra $579mm in taxes].

[Looch City]

Originally Posted by jammies

Do people actually expect the NDP to fix the economy? I certainly don't. I ust find it comical how many people expect them to do far worse than the PCs, who were vastly incompetent in every way except propaganda and populist twaddle.

"Best of the worst" is basically modern era politics.

[rubecube]

Originally Posted by Handsome B. Wonderful

The NDP are left holding the bag, and they're not making a damn bit of difference despite all their promises.

Yeah, what kind of incompetent boobs can't fix 30 years worth of problems in a mere six months? These jokers haven't even cured cancer yet, either.

[GGG]

Thanks firebug for your fantastic explanation of the tax liability stuff. Really helps to understand what the news is reporting

[firebug]

Originally Posted by GGG

Thanks firebug for your fantastic explanation of the tax liability stuff. Really helps to understand what the news is reporting

Thanks! But I'm sure the first tax account to come along will tear me a new one ;-)

The takeaway though IMHO is that while no company (or individual) likes a tax hike, the corp rate change from 10 to 12% is not terribly material and headlines like what accompanied the CNRL release really distort what the tax impact is for most firms.

On the jr end of things, many companies never make a profit to be taxed on during their entire corporate life (payoff comes on the exit takeover premium). For Sr's and intermediates, taxes can have more of an impact, but compared to Commodity prices, operating costs and royalties, a increase in corp tax rates of this amount is small fry.