Natural Resources

When special interests buy a government – updated

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

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13 replies »

  1. Something you've ignored completely is the massive expenditure of public money to build infrastructure to transport and export the commodities being sold by the resource industries. They're being subsidized two ways.

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  2. Reduced public share of natural resources is not newsworthy. In Christy Clark's four year term that would only amount to sixteen billion dollars. Chicken feed.

    Why don't you cover an important story like feral cats or even Jenny Kwan. That involved real money.

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  3. Norm, revenue situation is even worse. You've pointed out previously that almost $1 Billion is owed to gas producers as rebates they can apply against future royalties. That $1 Billion has not been booked by the government as the Auditor General wanted. If recorded, natural resource income would be reduced.

    Some of what government does show as revenue was taken in as much as 8 years ago. Gas producers were bidding high on drilling rights but that dried up about 4 years back, in relative terms. Auction amounts are recorded over 8 years and had they been recorded when received revenues in the past would be higher and revenues now would be lower.

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  4. “government revenues are based on profitability of resource companies”

    That's really thoughtful of them, looking after those poor, hard done by resource companies. Now, when will they show the same concern for post secondary students who have to pay increasingly higher tuition fees and go deeper into debt? Not to mention ever increasing MSP premiums, hydro rates, ferry fairs….

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  5. nice to know there is an extra billion for resource sector corporations but no money for education. Perhaps Christy and her cabal could cancel that little grant and give the money to the Surrey school board. last time I checked they still needed 10 new schools.

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  6. Norm, it might be extra-instructive if you could show a graph of political contributions to the BC Liberals from the resource sector over those years.

    Thank you for keeping us in the loop. Alex has/had his army, maybe we can form a “Norm's Navy.” I've got a canoe and two good paddles.

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  7. This was reported about another country but may apply in British Columbia too.

    “…government is on a blind chase as they are not even aware of how much is taxable from the mines and can't therefore know when they are cheated…

    “Firstly, government lacks the capacity to collect taxes and does not even know how much tax is due to them.

    “Paying something does not mean you are complying with the law because government has not capacity to ascertain what is taxable.”

    “…government does not know what is due to them.”

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  8. 'Easiest form of tax collection is from the T-4s of workers employed at the mines. Easy-peasy for the governments, while turning a blind eye on the bags of loot carried away by the mine/well owners.

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