It's that time of year again. Canadians are putting pen to paper (or fingers to keyboards) and figuring out how much tax they owe their governments.
For Canadian oil and gas companies, it's more complicated than the typical personal income tax return, but the process is the same: Companies calculate how much money they made or lost, apply any allowable deductions or deferrals, and send off the completed forms.
However, a recent Hill-Times article about supposed oil and gas "subsidies" suggested taxes don't apply to the oil and gas industry in the same way they do to the rest of corporate Canada. In fact, that's not true.
Canadian oil and gas consistently contributes about $18 billion annually to public revenues through income tax, royalty and other payments to governments. For context, $18 billion is about seven per cent of the federal government's total revenue in 2012.
The corporate income tax rate for oil and gas companies is identical to the rate for other companies. Oil and gas companies deduct capital expenditures and expenses using the same principles, and often at comparable rates, with other industries.
Payments from the industry help governments provide social benefits to Canadians.
According to a recent report on the fast-growing oil sands sector, economic contributions to GDP in 2012 were $91 billion, equivalent to five per cent of total GDP, and a larger benefit than generated by six out of 10 provinces.
Over the next 25 years, oil sands companies are forecast to pay $783 billion - that's about $85 million a day - to Canadian governments to help fund social services, education, health care and other government programs that benefit all Canadians.
On the jobs front, oil sands contributed to 478,000 jobs (direct, indirect and induced) in 2012, equivalent to three per cent of total employment, and a larger contribution to overall employment than five out of 10 provinces.
These are high-quality, rewarding jobs for professionals and skilled trades of all types - electricians, pipefitters, mechanics, welders and technicians, to name a few. New projects bringing more of Canada's energy from West to East also mean thousands more jobs for skilled workers in the refining, petrochemical and construction sectors.
Critics tend to focus on tax expenditure methodology , rather than the tax revenues generated and related jobs created, and they wag the subsidy finger at deduction rules such as capital cost allowance, Canadian exploration expense, and Canadian development expense, plus regional stimulus programs now being phased out such as the Atlantic investment tax credit (AITC). It is worth noting that the AITC is being phased out for the oil and gas and mining sectors, but is being retained for other industries. Other critics argue that government research and development expenditures, and even flow-through shares, are subsidies. In fact, they are all part of an overall fiscal framework that is intended to provide a globally competitive investment regime that attracts investment, creates jobs and benefits all Canadians.
Don't just take our word for it. According to The Tricky Art of Measuring Fossil Fuel Subsidies: A Critique of Existing Studies, using tax expenditure methodology to assess subsidies produces fundamentally flawed perspectives that ignore the overall fiscal framework and complex interaction between tax and royalty systems. The study was written by Kenneth J. McKenzie and Jack M. Mintz, from The School of Public Policy, University of Calgary, who are independent experts in fiscal policy.
As in other jurisdictions around the world, the design details of the tax and royalty elements of the Canadian fiscal structure aims to balance appropriately the high-risk, high-cost nature of oil and gas exploration and development activities.
Oil and gas is a global business and Canada needs to be competitive. A sound Canadian fiscal structure is in place and it must maintain a level playing field and attract investment to Canada.
Some people go further and try a different angle by attempting to equate subsidies to environmental laws and regulations they don't think go far enough.
As it should, Canada has some of the strongest, most comprehensive environmental legislation in the world to ensure clean air, water and land continue to benefit all Canadians.
Our industry's development is highly regulated and includes detailed environmental performance requirements mandated under existing laws and regulatory conditions applied to project authorizations. Performance is closely observed through independent, transparent government-led monitoring programs.
In addition, Alberta virtually stands alone among oil exporting jurisdictions worldwide with a law focused on GHG emissions. The law, in place since 2007, requires industry to reduce per-barrel GHG emissions by 12 per cent or pay a charge of $15 per tonne for any reduction shortfalls.
Money received from this carbon levy is paid into a provincially managed fund - about $400 million to date - that is applied to developing new technology for more emissions reductions - a point critics usually fail to acknowledge.
Some other oil exporting countries such as Venezuela and Saudi Arabia don't have carbon levies or carbon taxes, but they do bestow consumer subsidies designed to keep consumers and voters contentedly awash in affordable hydrocarbon energy - a stark contrast to the market-driven Canadian pump price approach.
Energy security, economic growth and environmental performance protect Canadians, provide jobs and both preserve and improve our quality of life. Canadians realize significant value from the oil and gas sector. Let's make sure taxes and other costs to industry are competitive, and keep it that way.