When John Baird was made environment minister I said he was no environmentalist, but a great politician. The job Stephen Harper gave him was not to save us from global warming, but to save the Conservatives from Liberals.
Need proof?
Listen to his comments of yesterday regarding the environment and existing tax incentives for the oil sands: “I cannot explain why the Liberal government of Dion made these changes,” Mr. Baird said, speaking in French. “I’m not here to defend the policies of Stephane Dion and the Liberal party. It was the Cabinet with Stephane Dion that created this program. Flaherty is in the middle of listening to the needs of Canadians from coast to coast, and he will present the budget not this morning, but in the coming weeks and months.” (Source: CanWest News Service, January 18, 2007)
Some facts might be useful here:
• Stephane Dion had nothing to do with the enhanced accelerated capital cost allowance (ACCA) extended to oil sands projects in 1996. He was intergovernmental affairs minister at the time. Baird is just plain spitting. And he knows it.
• The ACCA allows oil sands projects to write off their capital costs before they start to pay income tax. The producers say this is a tax deferral and not a subsidy, but those who think oil sands development is out of control say it’s a reckless measure. Conventional oil and gas projects can write off only 25% of costs, but the oil sands write-off is the same one extended to renewable-energy investments.
• The oil sands contain between 175 and 330 billion barrels of oil compared to about 262 billion in Saudi Arabia. Today we produce a million barrels a day, half of which goes to the States – which consumers 21 million barrels a day, over 60% of it imported.
• Oil sands production is scheduled to double by 2010 and perhaps quadruple by 2015. And while it costs the Saudis just three bucks to produce a barrel of crude, the gummy oil sands stuff costs about $20 a barrel. Today the world price is just over $50.
• Prime Minister Stephen Harper, before he ascended, said in December of 2005 that there would be no changes to the tax scheme under his administration. Looks like that will soon be as good as the income trust promise.
• The oil sands are the country’s most concentrated producer of greenhouses gases and consume vast quantities of fresh water.
John Baird is clearly on a cross-country mission to eat Liberals and do all he can to call into question the environmental credibility of Stephane Dion. After dissing the Lib leader in Ottawa yesterday, Baird flew to Regina for a fund-raising dinner for MP Tom Lukiwski last night, where he dissed Dion again at the Canadian Italian Club.
Fine, go for it, Big John. But pissing on Liberals is not the same as being environment minister, and Canadians have pinned high hopes on the fact Mr. Baird would be more effective than Rona Ambrose. The appetite for a climate change strategy that works is immense.
Is it time our national government reviewed the accelerated capital cost allowance on oil sands projects? Duh.
In 1996 the world oil price was just $21 a barrel, down from the all-time high of $38 in 1980 when the Iran-Iraq war broke out. At that price, the oil sands were barely economic, and the government of the day brought in the ACCU to spur investment in the Albertan north, create jobs and breath life into an industry. It worked. And today when oil prices have snaked into the $70 range, and sit at more than twice what they were a decade ago, the sands are paved with gold.
In this context, the oil sands don’t need tax breaks to expand. International investors are lined up to throw money at Fort McMurray. If ACCU was ended, the cash would still be there – but the pace of investment would most certainly slow. That’s something the greens want, but not something Alberta will easily stomach.
Should the capital costs allowance gravy train be at least slowed? Yeah, I think so, and the savings should be plowed right into finding ways of making the sands less hideous from an environmental point of view. Less water consumption. Less moonscape. Less carbon dioxide output.
In achieving that, we need to know the extent of economic activity lost and the impact on northern Alberta. We need to work with the province to raise its 1% royalty rate and devote that to funding new technologies for sustainable development of the billions of barrels left in the sands. Hell, we might even need political cooperation.
But what we don’t need is an environment minister who has started his mandate lying about who did what, when, instead of what he’s going to do, now.
Some things transcend politics. Apparently not Mr. Baird.
57 comments ↓
The oil sands are the country’s largest producer of greenhouses gases and consume vast quantities of fresh water.
This is factually inacurate. State your source. Electrical power generation is Canada’s largest producer of greenhouse gas emissions according to everything I’ve read. Canada’s largest polluter is an Ontario power plant too.
Is it time our national government reviewed the accelerated capital cost allowance on oil sands projects? Duh.
It’s high time our nation got rid of taxes on capital all together, duh. See what kind of investment getting rid of taxes spurs? We should all be so lucky to have this particular problem.
Should the capital costs allowance gravy train be at least slowed? Yeah, I think so
Why should producers bear this cost and not consumers. I’d support a greenhouse gas tax, but whats good for the goose [suncor] is good for the gander [nanticoke]. But where’s the consumer in all of this. How does slowing oil sands production help anything but cool local economics [read screw Albertans].
It doesn’t reduce global warming; thats for 100% sure. Every barrel we don’t suck out of the ground in a green way, Iran and Saudi Arabia will in a dirtier way. What will they do with their newfound money — wage war in the middle east. What is the co2 cost per day for war in the middle east Garth? What kind of environmental impact does a shock-and-awe campaign cause? Or does it not matter because its NIMBY.
Raising the royalty is going to happen anyway here; its on the agenda, because we need money to fund social projects around development. So no worries, you’ll get that — it’ll just stay in provincial coiffers.
Baird’s on the right track, but doesn’t have anywhere near the budget required to get the job done. *psst* Stephen, its spelt with a B not a M, when talking global warming */psst*
And while it costs the Saudis just three bucks to produce a barrel of crude, the gummy oil sands stuff costs about $20 a barrel.
Fyi, this is directly the result of environmental and labour cost, not significant differences in total energy expenditures when analyzing the entire mining/refinining/transportation of Saudi sourced oil. (Read, its expensive because it creates high paying jobs and protects the environment)
Less moonscape
How do you propose to mine oil sands without, uhm, digging up the ground? Or is less moonscape a metaphor for less mining?
Garth as soon as I read that article this morning I just shook my head in disgust. Baird is just going to keep on doing what he does and we dummies all know that whether he likes it or not. Just that some of us dummies are not going to be conned by you Mr. Baird, Harper and the rest of you in the Conservative party.
What I find ironic is that Albertans don’t get that they are being screwed by Big Oil…
Big Oil mines the stuff – and then ships the crude out of the province. Alberta is being “screwed” by not refining it there. It is being “screwed” because Big Oil is NOT trying to mine the oil in a staged approach that the local economy and local enviroment can handle – but is pulling it out as fast as it can. Alberta is being “screwed” by the low royalties and taxes that are collected from Big Oil… (Hell, I read somewhere that Alaska charges 22% royalties on oil pulled from it…In Alberta it’s 1%)
You really think that once the oil is gone, Big Oil is going to hang around, and help clean up the mess that they made? They’re not doing it now, when they are making money there – why would htey do it after there is no money left.
But whatever – continue to blame the EAST…You don’t need us to screw you over. You’re doing it fine yourself.
Tim, what a rediculus notion. Try living here.
The oil wont run out — if they can pull out all of our oil sands and sell them at $50 a barrel — we would be the most wealthy nation in the world.
We’d also be spending the summers at the north pole to get away from the heat, but thats another story.
The royalty is low because it is an emerging industry — it takes time to setup neighbourhoods, schools, stadiums and setup a secondary economy. Keeping royalties low increases wages and income tax revenues within the province.
So much so that we couldn’t spend it fast enough and had to give it back in prosperity checks (aka RalphBucks)
Big Oil is not our enemy here, they are our friend and the backbone of our economy.
If the oil ever runs out, that means we have burned billions of barrels of oil, and you can take solice, if that happens, we will all be dead before the oil runs out as a result of global warming.
So tim, as they say in the west, go freeze in the dark.
All Mr. Baird is doing, when he “pisses on the Liberals” instead of saying what he will do as Environment Minister, is continuing the trend of Mr. Harper since he was elected. That is taking every opportunity to point out the former Liberal governments failings.
To Messrs. Harper and Baird, the 2006 election is over and done with. This is 2007…what have you done and what are you going to do?
Broken promises on Income Trusts, fallen on your own sword re: Kyoto, lots of promises of increased spending come pre-election budget time, a practice you dispised when the Liberals did it…..etc..etc…etc…
Hey Tim N, BC gets screwed by sending raw logs to the US as well. I am sure you could find cases for every province. Why should they refine oil in Alberta. Maybe you would want to by Canadian made clothes and shoes so our textile industry doesn’t get screwed by China.
I’m pleased to report that the raw material on this blog is 100% refined in Canada, and then exported globally. — Garth
The oil sands are the country’s largest producer of greenhouses gases and consume vast quantities of fresh water.
Oh Really? And yet you could have nearly 10 times the amount that Alberta pollutes and just then come into line with Ontario:
http://www.eia.doe.gov/emeu/cabs/images/canada-airpol.gif
Ah the political spin. Gotta love it. Tell us how else the west are the big bad boogeymen and how we’re making things so awful for the innocent and oh-so-environmentally-friendly people in Ontario. How bout this for an idea…. clean up your own damn mess before you point the finger.
This is from Statistics Canada: Road transportation accounted for 19% of total emissions in 2003 and 23% of the growth in emissions from 1990, reflecting a shift in the types of vehicles used for personal transportation from automobiles to vans, sport utility vehicles and light-duty trucks. Other important sources were thermal electricity and heat production (18% of 2003 emissions, 27% of growth), and fossil fuel industries (10% of 2003 emissions, 13% of growth). — Garth
Thanx for another eye-opener, Garth.
I’m a fan of the conservative party, but was hugely disappointed that Mr Turner was removed from caucus. I truly believe he speaks for us “true” canadians who are being trampled by the “politically correct” and the “visible minorities” and “special interest” groups. When is enough, enough!? We need more peole like Mr Turner who has the balls to stand up and say “no more!”, otherwise we’ll find ourselves assimilated into this melting pot that Canada has become, and our national identity will be so dissected, it will be no more!….what are we, exactly?
Thanks,
Colette
Halton
“What I find ironic is that Albertans don’t get that they are being screwed by Big Oil…”
The Alberta government alone received in fiscal 2005-06: $8.4 billion in natural gas royalties, $1.5 billion in conventional oil royalties, $0.95 billion in oilsands royalties, $3.5 billion from the sale of crown petroleum leases for a total of $14.4 billion. Some 20% of petroleum rights in Alberta are owned by private individuals who also receive royalties.
“Alberta is being “screwed†by the low royalties and taxes that are collected from Big Oil… (Hell, I read somewhere that Alaska charges 22% royalties on oil pulled from it…In Alberta it’s 1%)”
The combined royalty rate for conventional oil and gas is about 25% in Alberta. Oilsands producers pay 1% gross revenue before payout and 25% net revenue after payout. The two largest oilsands producers Syncrude and Suncor pay a 25% royalty rate.
As an interesting aside Ontario has produced over 200 million barrels equivalent of oil and gas to date.
John Baird as Environment Minister, and now David McGuinty as Environment Critic! Both nice, genteel Ottawa boys representing adjoining ridings.
Garth, protect your sanity and get out of the House when those two go at it. Debate in Parliament is about to hit a new low.
My wife and I think you are representing Halton very well, even if no longer a member of the Conservative caucus. Keep them on their toes! Best regards, Eckard and Angy
So, Cars, Electricity, THEN oil (all of it, of which oil sands represent a small fraction) makes for
“The oil sands are the country’s largest producer of greenhouses gases…”
Care to print a retraction?
Me, retract anything? Pshaw. I will note those are 2003 figures, and that fossil fuel industry emissions have grown smartly since then. I’ll also point out that the oil sands are by far the most concentrated source of greenhouse gas emissions in Canada and therefore a prime place to be trying to ease the problem. Wouldn’t you say? — Garth
I would like to point out that Big Oil is not the bad guy. They haven’t broken any environmental laws that are currently on the books. It is big fat North American consumer that is driving the demand for the black goo. Big Oil isn’t pumping it out of the ground just because they feel like it. It will probably take more than the 5 years left until the Kyoto deadline to build a pipeline to sequester CO2. That project alone will be in the billions of dollars. Add the additional billions we would have to send abroad just to stay in Kyoto and we will be among the most heavily taxed countries in the world. (At least until the pipeline is built)
I will note that the figures have not changed substantially.
I will note that Nanticoke seems like a much more concentrated source of co2 emissions.
I will note that the GTA area produces more tailpipe emissions than all of Alberta.
Where should we be looking to make improvements again?
Seems like O-n-t-a-r-i-o would be a good place to start trying to ease the problem. Wouldn’t you say?
Maybe we should all be doing a lot more – under the guidance of an effective national government with a coherent climate change strategy – instead of dumping on each other. Man, we sound like… politicians. — Garth
I’d agree Garth, lets work on this instead of attacking regions.
I want to see a co2 tax — across the board — cars, power plants, oil sands — everyone getting hit equally for their carbon footprint.
Take that money and directly invest it in co2 reducing technologies — letting the bad pay for the good.
Do you support this kind of thing?
A CO2 tax? Torontonians don’t even accept the “climate change” tax that the Mayor is charging on downtown parking. Canadians are such hypocrites..ie.. Yes I want to do something about the environment so long as it doesn’t affect my bottom line.
I would suggest the government start charging an annual fee for a “clean air pass” on everyone’s vehicle when they go to renew their licenses. The amount of the tax would depend on how much CO2 their vehicles emit per km and how many kilometers they drove in a year. The money would then be invested in green projects that would offset an equivalent amount of emissions. Just like at http://www.cleanairpass.com .Surpised no politician has suggested anything like this yet. It seems I would make a better Environment Minister than anyone we have had over the last decade.
KPK,
You hit the nail on the head…It is the consumer that drives the market, not the producers.
Kevin,
What is with you and tax, tax, tax? How about, as Garth said, a ‘cohesive plan’, one that finds common ground, that people, all Canadians embrace?
Government should be aiding people to make the solution work. Like any design project:
1. Define all the variables
2. Categorize the variables
3. Idealize the design
All I have heard for years are knee jerk reactions, politically spin doctored ‘feel-good’ plans, future promises.
Gee, we talk about Emerg/Surgical/Lab Test Wait Times…Well, this issue is in critical condition…not something that should be put on a waiting list!
How about tax breaks on new vehicles, tax breaks on fuel? People would love to buy a new vehicle if they didn’t have to add 14% to the price to pay the GST/PST!
On a $20,000 vehicle (as an example) the taxes add another $2,800 which interest must be paid on as well. The government needs to stop wasting money on studies and start doing things that produce results.
If those who seek public office do not know anything, then let those who do run and get about the job of governance.
We need more engineers, people with real world experience, and a hell of lot less lawyers who have only pushed paper for a living leading.
Every journey begins with a first step!
Oily John? Well he’s so full of S***t, I mean hot air that he’s actually contributing to Global Warming all by himself. Just a joke but I couldn’t resist. Keep blowing John and your mouth will get you into hot water all by itself.
I am foolishly trying to stay positive about Mr. Baird’s sudden Greening, but with the talk of “Clean Coal” ~cough cough cough~ and this little pissy 58 million hand out in corporate welfare to compaines that are doing “Clean Coal” R&D ~cough cough cough~, and now talk about increasing the Alberta Oil Sand Production by 500% (pie in the sky, wishful think) by 2012. It is getting very hard to stay positive about the Green Briard. Seems to me he paint himself in green water based paint and it now raining.
Now kiddies here are a few questions (you can play to Garth)
At a normal Coal Fire Power Plant how many kg per KWH are produced
CO2?
NO?
SO2?
Particulate Matter (soot)?
Now, for a “Clean Coal” Power Plant?
CO2?
NO?
SO2?
Particulate Matter (soot)?
Now for a Coal Fire Power Plant Convert to LPG?
CO2?
NO?
SO2?
Particulate Matter (soot)?
Bonus Question
What is the estimated cost for converting a Coal Fire Plant to “Clean Coal” and what is the cost converting to LPG?
For real greener keener bonus marks list all the other real nasty crap that coal fire power plants spew into our environment.
Extra extra marks for those of you who can also list the life cycle emmissions data as well.
Kevin,
Do you work for an oil company?
What is with you and tax, tax, tax? How about, as Garth said, a ‘cohesive plan’, one that finds common ground, that people, all Canadians embrace?
I like aportioned taxes – they reward good behaviour and punish bad behavior. The lack of properly aportioned taxes means a lot of ecologically dammaging behavior flies under the radar and we’re all worse off for it.
Taxing vehicles carbon emissions promotes driving less and operating more efficient vehicles. It addresses the consumption problem. Right now a Hummer driver pays the same as me at the registry and I think that’s wrong.
Government should be aiding people to make the solution work.
Ya, but they’re willing to fund that to the tune of a measley 200 million. We need billions — that can only come from new, aportioned taxes, or the party commits political suicide.
All I have heard for years are knee jerk reactions, politically spin doctored ‘feel-good’ plans, future promises.
Carbon taxation (call em pollution royalties, or credits or whatever else you want to) have been a long time coming and charge people for a negative effect, they would allow for the negative effect to be directly offset. The cost of removing one ton of co2 from the air, should be balanced with the cost for letting someone put it up there. Make sense to me.
Gee, we talk about Emerg/Surgical/Lab Test Wait Times…Well, this issue is in critical condition…not something that should be put on a waiting list!
Our hospitals are broken and for some reason the provinces are waiting on the feds to do something. I will be petitioning our new premier for improved hospital services when he finally takes his seat.
How about tax breaks on new vehicles, tax breaks on fuel? People would love to buy a new vehicle if they didn’t have to add 14% to the price to pay the GST/PST!
I’m for getting rid of the GST on new vehicles, but don’t think for a second that will make them cheaper. Cars are priced on a what-the-market-will-bear schedule and not in relation to their production costs. Theres some competition, but not enough to bring it down to production-economic pricing.
How about instead, commit the GST funds from vehicles to subsidizing flex-fuel and biofuel integration. Now theres a concept.
If those who seek public office do not know anything, then let those who do run and get about the job of governance.
The question is who decides who knows what. If you asked our environment minister if he was a competant mp and an environmentalist — what answer do you think you’d get?
We need more engineers, people with real world experience, and a hell of lot less lawyers who have only pushed paper for a living leading.
Someone has to pay em. Getting laws passed requires lawyers. Thats just the system we live in.
Every journey begins with a first step
CLOSE NANTICOKE!
C.B heh good lord no. I work for a web development firm — mostly working with consumer appliance parts, catalogs and flyers, that kinda stuff. Nothing related to the oil sector.
Comment by y Bill-Muskoka on 01.18.07 7:39 pm
“You hit the nail on the head…It is the consumer that drives the market, not the producers.”
That is an accurate statement only to a point. Our entire society is based on production and the creation of wants then turning those wants to “rights”. I remember once watching a debate in the U.S. Congress on the environment. A Republican neo-con stood up and defended the “right” of Americans to drive gas guzzling SUVs. He also defended the “right” of the American automobile companies to produce them. He was arguing that conservation violated American rights.
An executive in the automobile industry explained to me why the North American automobile industry has run into trouble. Instead of considering want consumers might want the decision makers in the companies mandated their engineers with producing the vehicles and the marketers with selling them. They forgot about the energy crisis of the 1980s. That worked until they were faced with competitors from overseas that focused on what consumers wanted: smaller more energy efficient automobiles.
Capitalism is a wasteful system because it is often hit or miss on what will sell. When something does sell it builds in obsolescence so it will be able to sell replacements quickly. Washing Machines used to last about 20-25 years but today they are built to last no more than ten years. Many items are made to last just until the warranty runs out (remember when Sony was a good product). There is no incentive for things to last since most of the parts are made by one or two suppliers.
Fashion is dictated mainly by production not necessarily what consumers want.
I am not convinced that our economy is not more driven by the production of junk than by what consumers really want.
CB it’s also the city planners that dont maintain density ratios of employment spaces to living spaces [thus guaranteeing massive commutes]
But for the most part, automotive usage, and therefore gas consumption, is still determined by the consumer.
Marc and Kevin – I believe you are both missing my point. Alberta (and BC – and other provinces) could be making WAY more money by adding some value to the product – instead of just shipping it out in its raw form. As long as Canada remains a “natural resource” based ecomony – we are ALL selling ourselves short. Imagine how much richer Alberta (and the rest of the country would be) if we did something with our resources instead of just shipping them to the US or China.
What I can no longer understand are statements like Kevin’s ” go freeze in the dark..” What makes you think that because I live in Ontario I don’t know what it’s like to live out West. Hell – I grew up out west. I know what it’s like to live there. It not an East vs West thing. It’s a “what’s in the best interests of us all”. I personally belive that a wealthy and powerful Alberta is a GREAT thing for Canada. It brings a western voice into the equation (which is sorely lacking) to balance off Ontario, Quebec and the east. However, I’m tired of Ontario being lambasted as the “bad guy” when the issue the politicians – sent to Ottawa – by you and me.
However it seems that that the West’s past-time is blaming Ontario – Quebec’s is begging for money, and Ontario’s is taking it on the chin. What a sad state of affairs….
In the early 1980’s I was posted to a city in Germany. Cat converters and lead-free gas were starting to be pushed heavily, with regulation on the horizon.
There was a letter to the editor that has stuck with me. The writer suggested that the reason car owners were being leaned on to to save the environment was that the government could lean on them individually and force them to comply. He suggested that industrial pollution was worse, but no government could afford to go after it. Besides, with car owners on the hook, government could claim that it was acting effectively.
Interesting thought, isn’t it.
Garth said, “The ACCA allows oil sands projects to write off their capital costs before they start to pay income tax.”
Kevin said, “It’s high time our nation got rid of taxes on capital all together, duh.”
You two are talking about two completely different things.
Writing off capital costs means, in effect, allowing more depreciation costs on things like equipment so that taxes are reduced now. So the companies show no income as their expenses are increased. In the future, though, they should have to claim more income as these expenses have already been written off.
Kevin, I believe you are talking about capital gains–meaning increases in values of stocks or real estate or businesses. This is a totally different matter and perhaps should be left for another debate.
Marg, no thats not what I meant. What I meant was that we – business owners – typically have to pay taxes on capital expenditures, which we then get to reclaim over the useful life of the item.
The oil sands just don’t have to wait for the useful life part and can write em off right away.
Least thats how I understand the ACCA dealie.
I argue that any money spent in the pursuit of making money, whether capital asset or not, should be net reducing.
Capital gains is a whole other can of worms.
Bill, With only 5 years left until our Kyoto deadline, I don’t think “incentives” or “voluntarism” will get us to where we need to go. It has to be mandatory, brute force taxation. I even question giving rebates for “hybrids”. A $3000 rebate on a hybrid vehicle is pretty expensive when you factor in total reduction of emissions. It’s better to tax used vehicles heavily annually and force people to buy “hybrids”. The tax money can then be used to invest in highly efficient projects that yield higher reductions of CO2 overall. Like BC Hydro’s Powersmart program.
Kevin, Thanks for the clarification.
But here’s the problem. Your idea just does not fit in with any of the generally accepted accounting principles which state that income earned should be matched with expenses incurred during the accounting period (the fiscal year).
As an example, my husband dabbled in real estate for a couple of years, was able to claim depreciation and expenses on his car. However, he left that business last spring. Are you saying he should have been able to claim the entire cost of the vehicle? I don’t think that would be right as he is no longer in business and the car still has value. This is why capital costs are spread over a number of years.
Good comments Garth:
Mr. Baird reminds me of a phony ad with a man called Mr. Clean on TV, trying to sell people his bag of environmental goodies. He’s not in it for the Environment at all… just all Harper politics and tactics.
This man is in this position primarily to attack the Libs past record. I’m beyond that and want to see what the Conservative government has done this past year and will be doing. I can’t believe any of his talk about the environment to be sincere as its all politically motivated.
What does his “Federal Accountability Act” do other than sound good to the uneducated public? Count on more political BS from this man.
I feel Mr. Baird does not work with other political parties and does not have the environment in everybody’s best interest… or maybe only until a majority government is achieved (which I doubt). He can’t even answer a question in Question Period- just listen to him!
The point of the tax incentives for the Oil sands was to be able to offset the BILLIONS of dollars that have to be invested in order to build the plants with ZERO return for many years. Once the plants are operational and making money the incentives should be tapered off.
As for shutting down Etobicoke, that’s a great idea BUT where will Ontario’s power come from? They shut down the nuclear reactors and that resulted in brown outs. So if they shut down the biggest generating facility without first having some other plan in place to provide the capacity who’s going to be willing to accept even wider rolling brownouts?
See unfortunately this is the kind of knee-jerk thinking the enviro-nuts do. They go all chicken little about every issue, real or embellished, but are conveniently absent on practical solutions. Instead of focusing on touchy feely pie-in-the-sky ideas, we should be developing long-term strategies and implementing plans to achieve them.
I disagree with you on this one Kevin.
Businesses do business on an accrual basis — not a cash basis.
This is why you don’t get to write off the value of your inventory – it is reported as an asset and matched with revenue when it is sold.
Same with capital assets and depreciation/amortization (known for tax purposes as capital cost allowance – CCA).
Whenever the government allows business to write down its assets at a significantly faster rate then the true economic substance then that is effectively a tax subsidy.
Why should a company get to write off an asset in, say 2 years, if it will, in economic reality, generate revenues for 10 years?
That’s called a tax subsidy and anyone who understands the time value of money knows this.
How about not destroying lands to build massive dams – like those on Cree lands on Rupert’s Land? Oh yeah it’s not Alberta – so let’s totally ignore it.
Has anyone had a look at the Lake Athabasca and Great Slave Lake? Heavy oil extraction is done with steam, and where does the waste water go? Nobody with a voice lives down stream – I wonder how things would be if Calgary was down river from Fort MacMurray?
For decorating and dressing my mother-in-law uses to old English saying of “Blue and Green should ne’er be seen, without a colour inbetween,” that is blue and green don’t mix.
The same appears to be true of the environment, blue tory and green environmental policy don’t mix without creating an aweful mess!!
Maybe its the yellow NDP or red Liberal, thats the colour inbetween to make the whole thing work!
Can’t we all stop picking on each other and face the facts that we are all guilty of messing up the environment. And, thank you Garth for being honest about Dion’s role in the environment issue. That’s what I like about Elizabeth May – she’s honest about what she likes and dislikes about each of her rival parties and it sure hasn’t hurt her. I think Canadians are sick and tired of the Conservative’s American style of bashing, trashing and trying to ruin the reputations of it’s opponents. If Elizabeth May looks like she might hurt their majority, I wonder how they’ll try to ruin her.
It’s refreshing to debate on policy instead of this pathetic degrading of people.
I want to draw your attention to the article below that appeared
in the LA Times this morning about incentives to lease hybrids and fuel
efficient cars in general, vs SUV’s. At the very bottom of the article
is a breakdown of who is driving what that I’ve summarized here:
Sixty-six of the Assembly’s 80 members use leased cars. The breakdown:
. 38 Hybrids (13 Republicans and 25 Democrats)
. 10 SUVs (8 Republicans and 2 Democrats)
. 18 Other vehicles
Thirty-six of the Senate’s 40 members use leased cars:
. 13 Hybrids (2 Republicans and 11 Democrats)
. 10 SUVs (7 Republicans and 3 Democrats)
Question: Is there any equivalent comparison(s) that may be stated for
members in the provincial and federal government?
Yours truly,
Eric
Bowmanville, Ontario
Copied from the Los Angeles Times January 19, 2007
http://www.latimes.com/news/local/la-me-cars19jan19,0,135732,full.story?coll=la-home-local
One thing is for sure…on February 2, 2007 PM Harper and his trained pitbull will have to deal with hard reality when this Landmark UN study backs climate theory is released. I imagine Harper, Baird, and Dubya will be on a conference call asking each other ‘What do we do now?’
SLG – My sentiments exactly.
C.B. Innes,
“Capitalism is a wasteful system because it is often hit or miss on what will sell. When something does sell it builds in obsolescence so it will be able to sell replacements quickly.”
I totally agree. It promotes massive duplication of effort too often resulting in wasteful consumption of resources and power.
Here is an example of how to make it work for you. Look through the Princess Auto catalog…note the massive price reductions because they are buying up over runs of production, obsolete items, that still are wanted or useable, etc. There is a new store named ‘XS Merchandise’ in Barrie, right down the street from Princess Auto, which is right next to Busy Bee, a major importer of metal and wood working equipment.
That one block has more values available than the WalMart store around the corner.
If we took the total energy consumed to make all the components of a product, including the tooling, dies, packaging, transportation, distribution, retailing and put a value on them I wonder how the people would support such waste?
Asia, and Japan especially, has taken the wise counsel of William J. Demming. They cooperate with each other and allocate manufacturing to specific companies. Take plasma TV’s for an example. With all the name brands available there are, in reality, only four manufacturers of plasma TV core structures.
Likewise, Chrysler has joined wisely in this approach as well by using such items as their new World Class Engine, the new CVT-2 transmission, same as Nissan, Audi, etc. uses.
So, we have one or two plants producing components for many manufacturers, rather the the old school of everyone doing their own thing with massive duplication. The Iron Belt, aka Midwest of the U.S. used to be the Heartland of manufaturing…not any more. Heavy industry has been shipped to Asia for the most part. The heavy industries that generate the most pollution are now there, not here. The remaining manufacturing is finishing and assembly.
Hence a major trade system of JIT (Just In Time) has become the rule. No more massive warehousing of parts…they arrive like a continuous conveyor belt, especially for the auto manufacturing industry. The trouble with that is that it now takes more trucks, spewing more pollution, when with on-site warehousing rail transportation would work fine. One thing begets another, it is Chaos Theory in action!
Now, business people are smart when they need to be. The MSM does not inform the public of such conservation techniques because they are too obsessed with idiocy like the Trump/O’Donnell feud, which is as idiotic as I have seen in all my years. It is nothing more than a ploy to get press and media coverage to promote their shows and themselves. We should be taxing the MSM per watt charge for broadcasting such crap!
Anyway, short on time his morning. Have a good day.
Kevin,
Good morning. Sorry I am short on read/write time this morning. I did read your response…thank you.
I believe that reward/penalty is not the best approach…positive incentives work better for most people. But that is another lengthy discussion I just cannot afford to deal with today.
Bottom line is, if the government wanted to really clean up all pollution from automobiles they would buy, or seriously assist in purchasing, everyone a new or newer vehicle. Just clearing the roads of the clunkers would be a major asset.
I will say this however, since about 1995 most vehicles have been pretty darn clean on emissions compared to what we had before, and the emission systems work or let the operator know there is a problem via the Engine Trouble Light, also known as the Check Engine Soon, which means out of warranty, better check your available funds too light.
With mandatory annual or bi-annual testing people are already forced to comply. That is not in all areas however. I recently read that Ontario is considering dropping the annual testing requirements on the newer vehicles because only about 1% fail the emissions test year after year.
Gotta move on to other topics and blogs and get things done today. Have a good day, weekend, and I will catch up Sunday!
Jason and Marg, the concepts of retained earnings for income tax purposes and those for GAAP are not the same.
For example, a computer lasts a graphics designer for maybe 2 years tops. The CCA at 20% will take 5 years to depreciate that asset. Conversely I know a few appliance stores that are still running dos systems on 486’s.
CCA isn’t tied to GAAP accounting — they’re related at best.
As an example, my husband dabbled in real estate for a couple of years, was able to claim depreciation and expenses on his car. However, he left that business last spring. Are you saying he should have been able to claim the entire cost of the vehicle? I don’t think that would be right as he is no longer in business and the car still has value. This is why capital costs are spread over a number of years.
Marg, Let me put it this way. Would he have been able to be a realator without a car? Nope. Then why should that not be a legitimate business expense, why should you have to pay taxes on it at all. I understand the accrual basis but I also understand paying taxes on business equipment means that companies see little-to-no difference tax-wise by investing in new equipment in the first year of it’s use.
For example if I buy a new computer for my business. I get to write off half of one years CCA cost — and pay tax on the rest. I’ll get it back — but that just put the cost of that computer up x% in the first year.
Now lets talk power plants and oil facilities. That % makes them say, know what, we’re just not going to do it.
By allowing them to defer the tax (until they are profitable, not until the useful life is up) they can offset this negative market effect of the CCA.
Taxation is not a given. I understand CCA operation, and we don’t need to tax it.
As for your car still having value Marg, was it purchased with after-tax dollars? Methinks so. I mean the investment tax credit is nice and all but lets face it the money going in is already taxed.
If it was bought through earnings — well then, it encourages a reinvestment of those earnings, and to me thats worthy of not being taxed.
Also the cost of administration of the CCA is massive. Getting rid of it would eliminate one very large brake on the economy.
I’m definite not the first to suggest this.
Kevin,
“the cost of administration of the CCA is massive. Getting rid of it would eliminate one very large brake on the economy.”
I could not agree more!!!!
The U.S. allows small businesses to write off $25,000 per annum in equipment expenses, no amoritization required unless the equipment would be a new vehicle or major long life piece.
Likewise, CRA makes it a dream to employ accountants, but most small businesses can do their own tax filings. When I say small I mean sole proprietorships, mom and pop operations.
The number of pages CRA requires is not GREEN in any way shape or form (all puns intended). The U.S. has ONE page called a 1040 that handles most people’s tax filings. If you have a small business then two more page need to be filed. Capitol Gains adds another one or two.
We are supporting a massive number of people shoving paperwork around.
Otherwise, Canada is way ahead of the U.S. in attitude, electronic filing, etc.
Another issue is the GST. Ontario pays people to file their PST filings, but not the federal government. It takes a lot of time to do the returns correctly. Without computerized bookeeping it would be next to imposible.
Likewise, if you collect
oops…missed some of the previous post doing cut and paste…
…Likewise, if you collect
AHA! a little html error scarfed off the rest…here it is:
Likewise, if you collect less than $1,500 per year then you only need file annually. Over $1,500 and you must file returns quarterly.
There is a lot of room for moderinization and efficiency in our tax system! At least I have found the Canadian personnel human and helpful…a real compliment to how we treat each other. The U.S. I.R.S. (Infernal Revenue System) is like dealing with the Mafia.
Perhaps Garth will comment on why Ottawa deems it necessary to have so many ’schedules’, so much detail in our tax returns, so many blank lines, pages, etc?
To me it looks like the forms were evolved over and over and never consolidated into a sensible and meaningful format? Usually the result of turf war mentality amongst the various agencies!
James,
Blue and green do mix – look at the Green Party – they are fiscal conservatives and progressive on the environment. Elizabeth May is speaking at a workshop this weekend in Vancouver at Simon Fraser University on Poverty and Guaranteed Minimum Wage. I have worked with the homeless here and it is estimated it costs $40,000 a year to take care on someone on the street, multiple hospital admissions, etc. I was involved with the homeless census here and sad to say about 60% of them have disabilities, mental as well as physical. We threw 800 patients out of Riverview saying it was more humane to have them in the community – they ended up on the streets. I am interested in what the Green Party has to say about this. Will keep you posted.
Kevin,
I’m an accountant so I know taxes and accounting.
1) Computers used to be deductible for tax purposes (CCA) at 30% subject to the half year rule in the year of addition.
Since March of 2004 that has been increased to 45%.
2) CCA rates are used for simplification.
For every computer that is thrown out within 2 years I can point to 10 that are used for 5+ years, therefore, the typical business is getting the deduction sooner than economic reality.
Also, computers are a bad example on your part since a taxpayer has been allowed to put them in separate classes to get terminal losses, if appropriate, upon disposition and reacquisition.
3) CCA is related to GAAP in something called “future tax liability/asset.”
It is generally known that across public companies most have liabilities (some have assets but not many) and these liabilities primarily arise from timing differences between CCA and GAAP amortization (there are other reasons too).
So, companies already measure these differences and the extent of the timing differences are known – and it comes out, overwhelmingly, as a liability to the companies.
That means that the company is paying less tax today than it, theoretically, will in the future.
Hence, it is a tax subsidy to business since, on average, CCA rates exceed the true depreciation of various assets.
At least that has been my experience as a public accountant who actually prepares T2 returns and financial statements.
Jason, you’ve clearly got the CCA classes memorized better than I do =P.. How much a year can I write off my space craft again? heh.
The bottom line is you’re paying taxes on things that in the long-term wont be taxed. So why pay taxes up front on them…
Bill is correct that in the US you can write up to 25,000 bux off. This is good but doesnt help a machinery shop setup that needs a million dollars worth of equipment, and wont be able to receive the small-business-tax-credit if they purchase it all in their first year.
I say just get rid of CCA alltogether and let corporations invest in equipement in their first year of operation — it works fantastically well for the oil sands.
For every computer that is thrown out within 2 years I can point to 10 that are used for 5+ years, therefore, the typical business is getting the deduction sooner than economic reality.
Yes this was what I meant by 486’s. But the point is, industry doesn’t work on averages so why should our tax code. The U.S. system doesn’t – they much more closely tie taxation and in-house estimations of amortization.
If is a tax-subsidy — it’s only being one n years down the road. It’s not saving you any money in your first year — when access to capital is most critical.
CCA might work for public companies, but for startups its a really big burdeon to pay taxes on invested income or expand your business from revenues.
It’d also simplify our tax code massively if we got rid of the CCA all together — and that means less administration cost.
I don’t know of any particularily good reason not to other than the government wants their ‘peice’.
Jason,
Also, the U.S. allows the write off of interest on purchases where Canada generally does not! So, when we look at the amoritization of a million dollars of equipment, we are also looking at a loan, interest, and long term payback, plus tax incentives proffered to specific enterprises.
The total tax writeoffs exceed, generally, what we can claim to CRA here.
Following rule of 7/8’s the interest is the bulk of monthly or other periodic payments, with little being applied towards principle reduction during the first 3-5 years of the term.
Disclaimer: I am not an accountant…My wife is though, and I have run a small busines for over 30 years. LOL Please do not get me into the CGA course…my brain will fry! LOL all I can say is thank GAWD for computers. I have a severe callus on my thumb and finger from holding pencils and pens (when I am sure I am right…LOL)
Hi all!
Google “TRUEVA”. A study of how the business climate would change if the unpaid costs of environmental damage are given a value and added to corporate overhead. Makes for an interesting read.
Kevin, I assure you it is not difficult to apply CCA. The computer programs do all the work and, in reality, we are merely talking about basic mathematics.
I also do not care what the US does – I have seen many things that they do that make absolutely no sense.
Given your limited knowledge of our tax system you will have to excuse me if I don’t believe your claims on how much better the US system is – I know, in some ways it is, in many ways it is royally screwed up (go ask the middle class about AMT as just one example).
Bill – interest is deductible in Canada if it is incurred to earn income. Yes, there can be some complicated rules in some cases.
Sure, one may not be able to write off interest on the purchase of Porsche (since the monthly limit is $300) but if a person is a trucker he can certainly write off the interest on his rig since he is using it to earn income (since his rig is not a “passenger” vehicle).
I also am not confident in your knowledge of Canada’s tax system, never mind the US, to bother taking this conversation further.
Once again: there is a reason most businesses show future tax liabilities and it is generally because they write off equipment faster for tax purposes than they do for accounting purposes. Since these companies are supposed to try and match the accounting amortization with the useful life of the asset (granted, this is just an estimate) it is clear that a future tax liability is created (and measured) on the basis that the tax UCC is significantly lower than the accounting accumulated amortization.
Once again, it comes down to the time value of money. The government has given up tax revenue now in order to receive it sometime down the road. That is a tax subsidy, clear and simple.
Jason you’re right that I’m no accountant — just a lowly programmer =P
Applying CCA is not hard but the cost of ensuring compliance is. It’s possibly the most complicated part of the T2 return the majority of small businesses have work with.
I file a T2 return every year, and QuickTax does a pretty good job, but it’s far from perfect.
As for the U.S. system being better wholesale. No one said that. But there are a lot of things we could learn from their system, and high-grade for our own.
You look at the CCA like its a subsidy, that it’s lost revenue for the government. This doesn’t make a lot of sense to me because at the end of the amortization period, the asset is not taxed, in fact its 100% net reducing — so, therefor imho they’re collecting money over the amortization period they’re really not entitled to in the long run.
Now I’ve given my fair share of interest free loans to the cra, but they tend to pay them back on time so its not a big deal, but why add a significant startup cost for money you’re not going to receive in the long run? It doesn’t make a lot of sense, but then again I’m not an accountant.
Eliminating the CCA would eliminate a lot of accountants though — so I guess thats why you’re getting upset.
On another topic, why does the GST form not include a specific Zero-Rated Sales line? The computed form requires them to ask why you made x revenue and didn’t collect x * 6% gst. Resulting in a guranteed, yearly, audit for outsourcing firms applying the zero-rated rule.
CCA is not difficult nor costly: you enter your additions, enter lower of POD or cost for dispositions, and select the right class (which isn’t difficult to look up).
When I’m auditing or reviewing a file the capital assets section (both in the working paper file and the tax return) is often the easiest one to do.
I don’t know what you are talking about when you say the asset is not taxed: ever heard of terminal loss, recapture, reduced CCA (due to dispostions within CCA pools)?
It is very simple – if the government allows business, on average, to write off the cost of an asset faster than the true economic substance then that is a tax subsidy.
It would be like the government told a company to properly account for inventory. Then take 20% of that inventory and write that off too.
That is a timing difference and anyone who understands the time value of money realizes that it is better to get the deduction today than it is to get it next year.
The government ensures businesses get more than their fair deduction today by allowing them to write off more than the true economic depreciation on the asset.
It is all about matching revenue to expenses; and capital assets are *assets* that generate revenue over time and, therefore, should be expensed over time.
Hence, accrual accounting – i.e. GAAP with some relevant modifications to reconcile GAAP to taxable income (which is rarely difficult – except for large, consolidated company structures).
Now, if you want to make the tax system simpler all you would have to do is eliminate capital gains/losses. No more section 85, 55, 39 etc…
Those are the hard sections.
You are also wrong about zero rated firms having a guaranteed yearly audit. I deal with many fishing companies and they rarely get audited.
I have experience in this field with literally hundreds of clients so I know you are either speaking from some very rare experience or you are blowing smoke.