Energy sector and agriculture: federal revenue forgone from tax provisions

Published: December 7, 2021
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Abstract

Senator Rosa Galvez requested that the PBO estimate the cost of tax provisions specific to fossil fuel development including the deduction of resource related expenses and incentives for liquid natural gas (LNG) capital investment. She also requested an estimate of the lost revenue from exemptions to the carbon levy for agriculture. This report provides estimated revenue impacts for the items requested.

Highlights

  • Oil, gas and coal mining corporations have reduced their exploration and development expenses since 2014 due to economic factors and policy changes.

  • PBO estimates that resource specific expense claims by oil, gas and coal mining corporations reduced annual federal tax revenue by $1.8 billion, on average, from 2015 to 2019.

  • Carbon levy exemption for agriculture was worth an estimated $179 million in 2019 when levy was $20 per tonne. This will rise dramatically as the levy increases to $170 per tonne.

  • Simple removal of the exemption may overstate potential revenue gains since Pan-Canadian Framework has provisions for other trade-exposed industries (OBPS).