Posted on 09/24/2007 1:43:58 PM PDT by familyop
Royalties are a cost of doing business, so are taxes.
I'm not saying that Canadians don't deserve to be paid for their oil. However, increasing the percentage of existing royalties is exactly the same as taxing oil production in this instance, and has exactly the same effect.
When the government decides to increase the revenues they receive from business, that is usually called increasing taxes. However, in this case, since their is an existing royalty they can just increase it and say that they didn't raise taxes even though the effect is exactly the same.
In this case, it's just arguing semantics. In either case the government is talking abut taking a larger chunk of revenues.
More generally, when businesses know the royalty rates going in, they chose to pay the royalties. They don’t get any choice regarding taxes.
Royalties are payment for the exchange of property rights. Royalties on resources are no different than royalties for intellectual property — e.g. payments to musicians for CDs, actors for DVDs.
In Canada, there’s also an important technical difference between a provincial “tax” and a “royalty”. (Or so I've read -- I'm no tax expert.) Companies can deduct royalty payments from their income for federal tax purposes — but, not provincial taxes. If Alberta’s oil royalty rates are increased by about $2 billion, then the federal government would collect several hundred million less tax dollars. The reduced taxes would partially offset the cost of the increased royalty for businesses. Needless to say, the federal government wouldn't like this to happen.
That is an interesting spin on things I wasn't aware of.
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