Auditor General

Tax expenditures

auditor general

The BC Auditor General today released Understanding Tax Expenditures. From that report:

The tax system can also be used to achieve public policy objectives through the application of specific measures, such as preferential tax rates, exemptions, deductions, deferrals and non-refundable tax credits.

These measures, known as tax expenditures, represent a tax break that government offers people and corporations in support of its policy objectives. It’s forgone revenue, or money that government doesn’t collect, but could if it didn’t offer that tax break. In 2016/17, tax expenditures in B.C. accounted for over $7 billion in foregone revenue.

Tax expenditures are debated and voted on only when the legislation for them is enacted or changed. This doesn’t happen very often. …Today, legislators may not have all the information they need to make informed decisions about whether tax expenditures continue to achieve government’s policy objectives.

The last time we mentioned this topic was almost 25 years ago in our 1993/94 Report on the Public Accounts… Tax expenditures are significant, yet government doesn’t report them in a way that’s transparent and easily understood.

The government’s response includes this gem:

The Ministry of Finance agrees that it is important that legislators and other users of the Province’s financial information have access to complete information relating to BC’s tax expenditures. We will consider improvements to our reporting of tax expenditures.

Make no mistake. The Finance Ministry and other government departments have no interest in transparent reporting. If they did, measures would have been implemented long ago. Today, they have no intention of doing more than “considering improvements.”

The government’s statement is like that of a group of staggering alcoholics pouring another round while promising to consider altering their drinking habits sometime in the future, maybe.

The Auditor General’s report advises:

▪There is no requirement in accounting standards or legislation for the government to disclose tax expenditures in either its budget or its financial statements.

▪The OECD recommends that tax expenditures be subjected to budgetary control in
the same way as regular expenditures are” during the annual budget process.

▪In addition to the cost of the tax expenditures, government may be supporting related policy objectives through direct spending that could be complementary or contradictory to the tax expenditures.

There might be no better example of the last point than government imposing carbon taxes worth something over a billion dollars a year while it is providing almost a billion dollars in drilling credits to carbon producers in northeast BC.

One tax encourages reduced use of fossil fuels; the subsidies through tax expenditure encourages increased use of fossil fuels.

Some politicians choose to be fence sitters. In BC, we’re led by people who aim to stand on both sides of the fence.

No surprise that an Insights West poll reported politicians are respected by only 22%, a level less than 1/4 of the 91% reported for nurses.


My question by email to the Auditor General:

I wonder how you managed to produce 40 pages on tax expenditures without a single mention of natural gas royalty reduction programs.

Producers have deducted $5.85 billion in royalty payments, 2007-2018, and have accrued a further $2.61 billion in unrecorded credits accrued by producers.

One would think that an almost $1 billion a year benefit by tax expenditure, flowing to a relative handful of companies, would be a subject worthy of specific mention.

5 replies »

  1. 2016/2017 was 7 billion dollars. Canadians and BC’ers in particular have staggering amounts of personal debt and the government never stops trying to glean as much as we can stand every year with no breaks. And John Horgan rides in on his white horse and promptly gives away every last penny of our measly profit from our resources. Way to help us out … i mean sell us out. Guess the 100 billion prosperity fund was just the liberals trumpian moment. well one of the many. If we made corporations pay what they did when Gordon Campbell was premier we would probably be ahead of the game. Is it me or is the system truly corrupted towards big business and the 1% ? Naw its not me.

    Like

  2. Norm: Re your email to the Auditor General. Were you expecting a response to your ‘wonder’?
    Shouldn’t you have demanded a response? Just a rhetorical question.
    I’m so fed up with the government’s obsession to curry favour with the rapists of our resources to the detriment of the people.
    We would be much better off it they would just appropriate themselves an amount approximating the bribes proffered by the rapists and forwent the ‘tax expenditures’.
    Between ‘Climate Change’, government malfeasance, Site C, I’m reluctant to get up in the morning and face another day of distressing news.
    I wonder how tRump manages it?

    Liked by 1 person

  3. Norm writes: “The government’s statement is like that of a group of staggering alcoholics pouring another round while promising to consider altering their drinking habits sometime in the future, maybe.”

    I felt the spirit of Rafe oozing through there… minus the expletives. Well written!

    Liked by 1 person

  4. I certainly hope Norm receives a more favourable response than I upon contacting the Office Of The Auditor General. I wrote to get answers from Acting Auditor General Russ Jones after reading his remarkably transparent whitewash of the government’s illegal actions in the Dave Basi and Bob Virk BC Rail trial.

    His response in part:

    “Many of the questions in your letter, taken together, appear to be premised on an assumption that I can provide answers to you. I am not at liberty to disclose any information collected in the course of my audit, the basis for the findings and conclusions, or to express any opinion, other than those expressed in the audit report. My accountability is to the Legislative Assembly of British Columbia. The only avenue available for answers to questions will be afforded when this report is under discussion at the Select Standing Committee on Public Accounts in the future. At that time I will provide answers to the Members of the Committee within the context of the work performed.”

    I believe that answer to be an unreasonable, narrow, and convenient interpretation of section 9 of the Auditor General Act. Nevertheless, I sent my questions to the Committee through the Office of the Legislative Clerk in the prescribed manner. The questions were never asked, and the BC Liberal majority on the Committee voted down a request by MLA Corrigan to have the two deputies responsible for the plea inducement appear and explain their actions.

    David Eby was a member of the Committee that helped whitewash the whitewash. He is now the Attorney General, and his Deputy is the former Assistant Deputy who signed the plea deal former Attorney General Plant says would be illegal. The deal the NDP promised to explore via a public inquiry, but now won’t answer questions about.

    This is democracy, including the rule of law, as practised in British Columbia. That should embarrass and enrage all good citizens.

    Liked by 1 person

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