Main menu:

History of RPE Thought

Posts by Tag

RSS New from the CCPA

  • Study highlights ‘uncomfortable truth’ about racism in the job market December 12, 2018
    "Racialized workers in Ontario are significantly more likely to be concentrated in low-wage jobs and face persistent unemployment and earnings gaps compared to white employees — pointing to the “uncomfortable truth” about racism in the job market, according to a new study." Read the Toronto Star's coverage of our updated colour-coded labour market report, released […]
    Canadian Centre for Policy Alternatives
  • Uploading the subway will not help Toronto commuters December 12, 2018
    The Ontario government is planning to upload Toronto’s subway, claiming it will allow for the rapid expansion of better public transit across the GTHA, but that’s highly doubtful. Why? Because Minister of Transportation Jeff Yurek’s emphasis on public-private partnerships and a market-driven approach suggests privatization is the cornerstone of the province’s plan. Will dismembering the […]
    Canadian Centre for Policy Alternatives
  • 2018 State of the Inner City Report: Green Light Go...Improving Transportation Equity December 7, 2018
    Getting to doctors appointments, going to school, to work, attending social engagments, picking up groceries and even going to the beach should all affordable and accessible.  Check out Ellen Smirl's reserach on transportation equity in Winnipeg in this year's State of the Inner City Report!
    Canadian Centre for Policy Alternatives
  • Inclusionary housing in a slow-growth city like Winnipeg December 3, 2018
    In Winnipeg, there is a need for more affordable housing, as 21 percent of households (64,065 households) are living in unaffordable housing--according to CMHC's definition of spending more than 30 percent of income on shelter.  This report examines to case studies in two American cities and how their experience could help shape an Inclusionary Housing […]
    Canadian Centre for Policy Alternatives
  • True, Lasting Reconciliation November 21, 2018
    For the first time, a report outlines what implementation of the United Nations Declaration on the Rights of Indigenous Peoples could and should look like at the provincial level. This report focuses on implementation in BC law, policy and practices. Fundamental to the UN Declaration is an understanding that government must move from a “duty […]
    Canadian Centre for Policy Alternatives
Progressive Bloggers

Meta

Recent Blog Posts

Posts by Author

Recent Blog Comments

The Progressive Economics Forum

Unrest in Bill’s Republic of Doyle

PotashCorp CEO Bill Doyle waded into Saskatchewan’s election campaign on Friday with an op-ed in the province’s two largest newspapers. It was accompanied by a paid advertisement from PotashCorp in Saskatoon’s StarPhoenix.

The company got some free advertising in Regina’s Leader-Post through Bruce Johnstone’s column, which repeated Doyle’s op-ed. The Saskatchewan Party is parroting the same lines.

In response to Doyle, former Member of Parliament and PotashCorp director John Burton has an excellent op-ed in today’s Leader-Post. I have the following op-ed in today’s StarPhoenix.

UPDATE (November 2): Political columnist Murray Mandryk is mildly amused.

Room to alter potash royalties

By Erin Weir, The StarPhoenix, November 1, 2011

Potash royalties are a major election issue. In his viewpoint article, Tax, royalty rates boost growth (SP, Oct. 28), PotashCorp CEO Bill Doyle argued that his company pays about 30 per cent of profits in royalties and taxes.

However, lumping together royalties and corporate taxes does not change the conclusion that Saskatchewan should raise potash royalties.

According to the Energy and Resources Ministry’s latest annual report, the province in 2010 received only $263 million from $5.6 billion of potash sales. By comparison, the government received $306 million from $2.2 billion of potash sales in 2004. Since the industry produced less potash in 2010 than it did in 2004, the entire $3.4-billion increase in annual sales reflected higher prices for potash.

The NDP platform modestly assumes that an improved royalty regime could collect at least one-fifth of this windfall profit.

The Saskatchewan Party opposes any royalty increase.

The above revenue figures include Saskatchewan’s Crown royalty and potash production tax. These potash-specific charges, which can be considered “royalties,” amounted to just five per cent of potash sales last year.

Doyle boosted this fraction to 30 per cent by adding federal and provincial corporate taxes to the numerator. He also reduced the denominator to potash profits from potash sales.

His approach implicitly assumed that the value of Saskatchewan’s potash, beyond mining and transport costs, belongs to private operators. From that premise, 30 per cent might seem like a reasonable tax rate.

But potash belongs to the people of Saskatchewan, even if the mining companies are private.

In effect, the province is giving 70 per cent of the return on its potash to these multinational corporations, and a further portion to the federal government.

Saskatchewan can, and should, keep a larger share.

A closer look at corporate taxes reinforces the case for higher royalties. The only remaining component of Saskatchewan’s corporate capital tax is the resource surcharge, which has been cut to three per cent of resource sales, from 3.6 per cent in 2006.

Profits in excess of royalties, the surcharge and other deductions are subject to corporate income tax. Saskatchewan has cut the provincial rate to 12 per cent, from 17 per cent in 2006. Ottawa is slashing the federal rate to 15 per cent next year, from 29 per cent in 2000.

As potash prices quadrupled, corporate tax rates fell. If royalties and corporate taxes are viewed as a package, recent corporate tax cuts leave additional room to increase royalties.

Because royalties are deducted from profits in calculating corporate income tax, each additional dollar of royalty revenue reduces bottom-line corporate profits by 73 cents, provincial corporate tax payments by 12 cents and federal corporate tax payments by 15 cents.

In other words, higher Saskatchewan royalties would not only collect a fairer return from potash mines, but also transfer some revenue from Ottawa to the provincial treasury.

Doyle wrote, “Saskatchewan is still the highest tax jurisdiction in the potash world.” The Saskatchewan Party also made this statement in its platform document and in the provincial leaders’ debate.

Unfortunately, repetition is not a form of evidence.

They have presented no publicly-available comparison to potash royalties in other jurisdictions. The corporate income tax rates of other potash-producing jurisdictions, such as the United States (40 per cent), Brazil (34 per cent), Spain (30 per cent) and Germany (29 per cent) exceed next year’s combined federal-Saskatchewan rate (27 per cent).

Saskatchewan has the world’s richest potash reserves and is close to the world’s largest potash market – the American corn-belt. The only reserves of similar size are in Russia and Belarus, which lack Canada’s infrastructure and political stability. There is no credible threat of the PotashCorp or other North American fertilizer companies decamping to the former Soviet Union.

As potash prices skyrocketed, the government kept royalties flat and cut corporate taxes. No evidence has been offered to support assertions that Saskatchewan levies the world’s highest royalties and taxes. On the contrary, the province is well positioned to negotiate a better return from the extraction of its potash.

– Weir is an economist with the United Steelworkers union, which represents most of Saskatchewan’s potash miners.

Enjoy and share:

Comments

Comment from travis fast
Time: November 1, 2011, 7:05 pm

OK Erin go here:

http://193.88.185.141/Graphics/Publikationer/Olie_Gas_UK/oil_and_gas_production_in_denmark_07/html/kap06.htm

Now scroll down to table 6.3. Inter alia you will see that the Danish government takes no less than 60% of total profits generated from oil and gas. That is the model. No?

Write a comment





Related articles