Auditor General

Tortured logic

More than nine weeks ago, I sent this message to the BC 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.

Today, I received a phone call from the Auditor General’s office where it was explained to me that royalties are “not tax revenues”. Therefore, billions of dollars in contributions of government toward gas industry drilling and infrastructure costs, by way of royalty reduction credits, are not tax expenditures.

One might think British Columbia’s Auditor General would favour maximum information in financial disclosure. Apparently, not in this province.

The International Budget Partnership (IBP) was formed in 1997 to promote transparent and inclusive government budget processes as a means to improve governance and service delivery. It provides a definition.

Tax expenditures

Tax expenditures are part of any government’s toolbox, and in some cases they can be an effective way to provide incentives to citizens and firms.

However, their impact on the budget tends to be much less visible than that of normal expenditures, and they receive little systematic scrutiny. They also can disproportionately benefit specific interest groups, who will lobby to maintain them.

As tax expenditures can be very large compared to normal government spending, it is important for civil society organizations to monitor them, assess their impact, and push governments to publish detailed information and carry out periodic reviews.

What are tax expenditures, and why are they of interest?

Tax expenditures are usually defined as a government’s estimated revenue loss that results from giving tax concessions or preferences to a particular class of taxpayer or activity. The revenue loss, or “expenditure,” is calculated as the difference between whatever tax would have been paid …and the lower amount that was actually paid after the tax break.

Tax expenditures are used instead of direct spending to deliver a government subsidy to a class of taxpayer or encourage a desired activity.

They can take many forms, including tax exemptions; tax deductions; tax offsets (or credits); and concessional tax rates or timing rules, such as accelerated depreciation of capital assets, that either reduce or defer a taxpayer’s tax liability…

A small number of companies —  mostly owned outside BC — have taken or accrued more than $8 billion in royalty reduction credits since 2007. The credit program has accelerated so that in four of the last six fiscal years, credits exceeded royalties that otherwise would have been paid.

With the near elimination of revenues from tenders for petroleum and natural gas rights explained HERE, British Columbia now gifts valuable natural resources to a specific interest group.

Yet, the Auditor General deems this government policy, with its multi-billion dollar impact, unworthy of pubic discussion. Our business-friendly corporate media also refuses to report the scale of tax expenditure subsidies to gas producers.

A specific interest group benefits hugely and ordinary citizens pay the costs. This is the system of corporate welfare, working silently.

23 replies »

  1. Thanks again Norm. The odor just never goes away. Governments/Corporations are seemingly always in bed together while taxpayers are left to pick up their conjugal tab. That the auditor is so distanced from reality makes one feel ill at the hopelessness of it all.

    Liked by 1 person

  2. What would one expect after the audit of BC Hydro that failed include Site C and the IPPs? How did the NDP get collared so soon? Really disappointing performance. Makes me think we will never see a real investigation into money laundering. I guess big money must talk in every boardroom.

    Liked by 1 person

      • There are far more examples of BC govt events and transactions worthy of forensic review than even hawks like Integrity and Breaker and Daily are aware of, eg supposedly routine real estate transactions, miscellaneous court cases, sweetheart contracts … the list is long, like an iceberg is deep. Right now we only see the tips of things, like the casinos enabling the fentanyl trade, but an open call for complaints of unfairness would be deluged, eg people screwed by ICBC.


  3. These are very clever people. Imagine …..Income in a royalty isn’t tax revenue.
    Thank goodness you wrote a letter asking about it.
    I guess this is why they rule , and we don’t have a say.
    Clever people.
    It will be hard to outwit these scoundrels, and look respectable.


  4. As I used to say, the politicians come and go, the bureaucracy endures forever.

    Some one who is a politician might want to “investigate” this.

    Wonder what they do call them?

    O.K. it looks like all of us taxpayers just got screwed but not kissed. So this might be a good time for us to write our Premier and demand a few answers and changes. This is a carry over from the B.C. Lieberal days. Some one needs to tell the bureaucracy there time might be over if they don’t clean up their act because the NDP is going to have to go to an election at some time. Of course the bureaucrats may prefer the B.C. Lieberals and hence the lack of change. Of course it is up to the Minister Responsible to get on with their Job and if they can’t do it, its time to change Cabinet Ministers.

    To all Cabinet Ministers, if you want to hang on to those nice salaries and perks you’re going to have to keep the taxpayers happy. Yes, a lot of us are happy with new schools and hospitals but if some changes were made we might be able to afford day care for children and seniors. If the NDP doesn’t catch up they and the B.C. Lieberals along with the Greens may find after the next election they have been replaced by a millennial riding a bike who had a min. wage job before, who all ran as independents.

    Liked by 3 people

  5. Its a fine detail to say tax revenue isn’t a royalty. It falls under “income” for the Province however. Norm”s publishing of the Governments published charts showing the loss of revenue for the Province from the oil/gas industry perhaps seemed to the [political ?] Auditor General a wrinkle to be responded to by a phone call from his office nonetheless.
    Friendly I’m sure.
    Who would think this backwater on the West Coast could have such intrigue.

    Liked by 1 person

  6. Building a massive earthen dam while the entire concept of the electrical grid in it’s current incarnation has recently been relegated to Dodo status is not serving any best practices ideals whatsoever. The liquid metal & sodium batteries developed at MIT (By Canadians at that) will soon render legacy power distribution obsolete, as now science has found a much superior storage medium than L/ion could ever be.

    Liked by 2 people

    • The only voice I’ve heard about obsolete central power such as the Site C.
      Thank goodness your view is still out there. 20% line loss from Site C to Vancouver I’ve heard..


  7. I had somewhat the same sort of reply from the A.G.’s office after they whitewashed the Evergreen Lines Business Case.

    American transportation engineer shredded the business case with such quotes:

    ” I found several instances where the analysis had made assumptions that were inaccurate, or had been manipulated to make the case for SkyTrain. If the underlying assumptions are inaccurate, the conclusions may be so too.”

    “There is another element of speed, which is station access time. At-grade stations have less access time. This was overlooked in the analysis.”

    “Also, on the NW alignment, the SkyTrain proposal uses a different, faster, less-costly alignment to LRT proposal. And has 8 rather than 12 stations. If LRT was compared on the alignment now proposed for SkyTrain, it would go faster, and cost less than the Business Case report states!”

    “Here again, there seems to be some hidden biases. As mentioned above, on the NW Corridor, LRT is costed on a different alignment, with more stations. The cost difference between LRT and SkyTrain presented in the Business Case report is therefore misleading.”

    “It is interesting how TransLink has used this cunning method of manipulating analysis to justify SkyTrain in corridor after corridor, and has thus succeeded in keeping its proprietary rail system expanding.”

    The Auditor General office has ceased to be the watchdog it was supposed to be.


  8. I think we are talking about political crime here going back to BC Rail, BC Hydro Site C, etc., and now the Casino crimes with charges stayed by the government.
    I think we need to sue the government for a failure to protect us from political crime. We are not suing ourselves but the politics of BC which has abandoned us to fate .
    One thinks of Holland who sued the government for failing to protect the people from rising sea levels caused by climate change, and won.
    In the case if I have it correct the government has responsibilities outlined in its constitution to protect the people.
    I remember a couple of cases in the province where it was sued, and the people nearly won but for meetings with the politicians who then reneged on thei promises.
    There is no reason why we have to pay court costs as citizens .
    I’m not a lawyer and present this as an idea on how to proceed.
    An imaginative lawyer who thinks outside of the box, and wanting to see justice done is who we need. One with real brains.
    Crowd funding as in the Dogwood Initiative, Lead Now etc. has been so effective.
    The natives have done well by fighting injustice, and never give up.
    What is the country of Canada’s responsibilities to its citizens in our constitution. That’s where I’d look first.
    Its a stormy night with a 962 millibar low covering the vast north pacific coast bringing our 6C weather from north of Hawaii., and a companion to write this letter with.


  9. “The publicly owned ICBC was formed to level the insurance playing field for B.C. consumers. At one point, ICBC had accumulated a surplus, and suggested to the government it give the money back to the people in the form of rebates to good drivers.

    But the B.C. Liberal cabinet ministers gasped at that heresy and decided instead that the excess money would be better used elsewhere. In 2010, the legislature passed a bill giving the cabinet power to move this “excess capital” from ICBC into government coffers.

    It has continued to siphon money from ICBC into general revenues to finance areas such as health care and education. It justifies this practice with the official government mantra that shareholders should benefit from profits, and all British Columbians, not just ICBC customers, are the shareholders, so all should benefit.

    That’s the same tune sung when justifying taking “dividends” from B.C. Hydro, but that melody is a little off-key, given that B.C. Hydro’s profits were manufactured, not real, and the utility had to borrow to pay the government its share.”

    Quote is from a 2016 Time Colonist editorial:


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