Revealed: oil giants pay billions less tax in Canada than abroad

Data shows companies made much higher payments to developing countries in 2016 than to Canadian, provincial governments

Thursday 26 October 2017 

Canada taxes its oil and gas companies at a fraction of the rate they are taxed abroad, including by countries ranked among the world’s most corrupt, according to an analysis of public data by the Guardian. 

The low rate that oil companies pay in Canada represents billions of dollars in potential revenue lost, which an industry expert who looked at the data says is a worrying sign that the country may be “a kind of tax haven for our own companies.”

The countries where oil companies paid higher rates of taxes, royalties and fees per barrel in 2016 include Nigeria, Indonesia, Ivory Coast and the UK.

“I think it will come as a surprise to most Canadians, including a lot of politicians, that Canada is giving oil companies a cut-rate deal relative to other countries,” said Keith Stewart, an energy analyst with Greenpeace.

Companies like Chevron Canada paid almost three times as much to Nigeria and almost seven times as much to Indonesia as it did to Canadian, provincial and municipal governments.

Chevron used to run its Nigeria and Indonesia projects out of the U.S., but after allegations that they evaded billions in taxes, their operations were moved to Canada.

According to data collected by the Guardian, Suncor also paid six times more taxes to the UK, and Canadian Natural Resources Limited (CNRL) paid almost four times more to Ivory Coast.

Oil company payments in Canada and abroad - how it breaks down

The revelations emerge as tax reforms proposed by the Liberal government to curb the use of loopholes by wealthy Canadians continue to be hotly debated and opposed by business lobby groups.

Even with the low rates, the Canadian Association of Petroleum Producers has been lobbying the federal government for more tax breaks to improve their “competitiveness.”

The Guardian used a new extractive sector database launched in June, 2017, after a law passed by Stephen Harper required oil, gas, and mining companies in Canada to disclose for the first time payments they make to governments around the world. The Guardian compared payment figures for 2016 to oil production levels.

The result of a global push for “publish-what-you-pay” corporate transparency, the Canadian law was billed as a way to empower citizens in developing countries to ensure more tax revenue is collected for much-needed social programs. While it was supported by Canada’s mining industry, oil companies fought against full disclosures.

“Publish-what-you-pay was set up to help fight corruption in the developing world, but ironically this data reveals that it’s Canada who is getting the short end of the stick when it comes to the public’s share of oil revenue,” said Stewart. “The Trudeau government should be demanding that oil companies pay at least as much tax here as they do abroad, and use that money to fund a transition to green energy.”

According to resource governance expert and UBC geography professor Philippe Le Billon, neoliberal policies in Canada and across OECD countries have resulted in lower taxes and royalties for companies.

“Companies in Canada will point to the jobs they are creating rather than acknowledge they could be sharing more of their profits, which mostly goes to shareholders who are not even in the country,” he said. “In key jurisdictions like Alberta, this has come about after decades of rule by Conservatives who are very cozy with oil interests. The numbers reveal a poor tradeoff: high emissions for not much revenue. It’s long-past time for Canada to follow a model like Norway’s, which captures far more revenue from oil production.”

While royalty rates in Newfoundland are the highest in Canada, in Alberta they have fallen from a 40 per cent high during the 1970s to less than four per cent, and a complex system of exemptions ensures companies often pay even less. The NDP government in Alberta backed away from a pledge to hike them.

Le Billon said the tax gap between Canada and developing countries has also been influenced by lower prices for Canadian crude and higher production costs.

“[Production in Africa] generated positive segmented earnings, therefore generating higher associated payments to the local Governments. In contrast, last year our Canadian conventional operations were generating operating losses, hence lower payment levels to Canadian governments,” a spokesperson for CNRL said. They reported losses of $204 million last year but have made $1.07 billion in profits in their latest quarter in 2017.

Chevron Canada did not directly address the discrepancy in tax rates, but a spokesperson said its reporting to the extractive sector database “are one of many important roles that Chevron Canada and our industry peers play as we produce safe and reliable energy and partner with communities and first nations [sic].” They reported losses of $497 million in 2016 after making $4.6 billion in 2015.

Suncor, which reported profits of $1.9 billion in 2016, did not return a request for comment. All three companies pay massive dividends to shareholders every year.

Natural Resources Canada referred questions to the Finance Ministry, which did not respond to questions.

Justin Trudeau’s Liberal government and the provinces also continue to give $3.3 billion in yearly subsidies to fossil fuel producers in the country, despite having pledged to phase them out.

[Photo: The Syncrude tar sands facility near Fort McKay, in Alberta, Canada. Photograph: Aaron Huey/National Geographic/Getty Images]