Tuesday, October 02, 2007

Royalty Is NOT A Tax


There seems to be some confusion on the pro-big-oil whiners on the right over the difference between a royalty and a tax. Royalties are before tax payments and thus are tax deductible.

If Alberta collects its back due royalties, plus increases the royalty rate on resource extraction it will be a TAX BREAK for big oil. And it will reduce payments to that loathsome traditional enemy of the Alberta First right wing; Ottawa. The irony is delicious.


Royalty payments are tax deductible. Hiking Alberta's royalty take by $2 billion annually would shave as much as $400 million off Ottawa's revenue from petroleum producers (the federal corporate income tax rate runs about 20%) and $200 million off Alberta's own income tax proceeds.
And it is also a provincial tax break. So quit yer whining and suck it up.

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6 comments:

Cam said...

Although I know you'll disagree with me, I don't like the royalty hike. Mostly because in my eyes it's an attack on the rule of law (i.e., the government changing the terms of a contract once the other party has already committed to previous terms).

But kudos to you for this much needed insight on the effects on taxation. It may be bad for the sector, but it's definitely not a federal tax grab.

eugene plawiuk said...

The rule of law? Dem with gold makes the laws. Actually I have posted here that the contracts allow for increased royalties. So sorry it is not unlawful.

Feynman and Coulter's Love Child said...

If Alberta collects its back due royalties, plus increases the royalty rate on resource extraction it will be a TAX BREAK for big oil.

Er, so then the oil and gas companies get to keep more of their money?

Gee, it seems so odd then that they are so opposed to it. And even more odd then that you are so in favour of it.

Until you put 3 seconds thought into it and realize that it doesn't matter how the money ends up in provincial coffers, only that it does. Cutting taxes by $200 million while increasing royalties by $2000 million is still a tax grab.

Oh sure, they don't call it taxes, but as I said in my original comment (which, by the way, was on my site, not yours, so your link ends up pointing to a comment-less post), whether you call it a tax or you don't, the money flows from productive companies into unproductive government. You don't let the Alberta government get away with this when it comes to Healthcare Premiums, so it's sort of odd that you can't figure out the problem here.

eugene plawiuk said...

You are an idiot. As a so called conservative you should understand the difference between land rent, which is what royalties are, and taxes. But of course you would have to read some libertarians like Rothbard or Tucker to figure that out. And from what I gather you get most of your information from the Sun.

Feynman and Coulter's Love Child said...

You really have to stop calling me an idiot every time I throw your own numbers around to show how you don't have a clue what you're talking about.

The difference between rent and taxes may be some brilliant mental coup in your eyes, but when the same organization is charging both to the same party, the distinction becomes effectively meaningless. The same thing that you think is good ("more money to the government") is in reality bad ("more money to the government"). This is an effective metric, and one that your readers should be well aware of by now.

eugene plawiuk said...

You have not thrown any numbers around and you have not shown anything except that you are an idiot.

Land Rent is land rent, collected for the public good. It is paid to the State. If you don't like the government change it. If the oil companies leave fine, we can always pull a Chavez and nationalize them.
As we did with Petro Canada which is now doing quite fine thank you.

Oh yes and along with being an idiot you are a politically correct right winger; homophobic, sexist and racist.