Before BC Liberals were first elected in 2001, they promised natural resource producers to materially cut the public share of values extracted. They kept their promise and producers filled party coffers in return. There is a fiction in Canada that no connection exists between political contributions and government actions. I disagree.
Producers paid less to extract public resources, even though rising prices increased their ability to pay. This shows the value of resources produced.
Government received amounts shown below. The charts show that resource production exceeded $18 billion in 2011 and government receipts in FY 2011-12 were well under $3 billion. Had the 35% share been maintained as it was during the early to mid 2000s, in one year, an extra $4 billion would have been available for education, healthcare and infrastructure. This province is heading for a crisis point in public education and I believe these simple charts demonstrate this is unnecessary.
Liberal defenders tell me that government revenues are based on profitability of resource companies and declining revenues reflect higher costs. Of course, that is guesswork. When multinational companies ship commodities overseas, there is a tax benefit when costs are assigned to production and profits assigned to post-production activities. In other words, profit calculations at the mine head are unreliable.
When Teck Resources leases offices in Vancouver, they pay rents based on the market value of the building, not on the company’s ability to pay. Landlords don’t vary the rent according to Teck’s profitability. Yet, when Teck extracts billions of dollars worth of BC copper and coal, they want to pay royalties based on what they calculate to be their profits. That’s a great deal for Teck, not a great deal for the public that owns the resources.
The BC government’s political dedication to collecting resource revenues is one issue; another is it ability to monitor production and enforce existing tax rules. Because of aggressive staff cuts and its “red-tape” reduction policy, the Liberal government lost ability to enforce laws and regulations and began to rely on self-reporting by producers. Complete accuracy may not be important for coal with values over five years ranging from 11¢ to 22¢ per kg. but it is vital for gold, which has moved between $35,000 and $54,000 per kg.
Note: revenue amounts are drawn from public accounts; production values are from Natural Resources Canada reports, Mineral Production of Canada, by Province.
Categories: Natural Resources