Goodies from Goodale: cuts in mini-budget

If measures adopted, Canada’s petroleum industry will have seen its income tax rate drop from 28% to 19% in three years

Gary Park

Petroleum News Canadian Contributing Writer

The Canadian government, facing its imminent defeat in Parliament and a Christmas election campaign, laid out a package of tax treats that have brought cheer to the petroleum industry.

Finance Minister Ralph Goodale has proposed lowering the federal income tax rate to 19 percent from 21 percent by 2010 and eliminating a tax on capital assets in 2006, two years sooner than promised, ending Canada’s role as one of the few countries to tax both corporate capital and income.

Whether all the changes are actually implemented is a moot point.

The government of Prime Minister Paul Martin could be toppled in the next two weeks if the opposition Conservative, New Democratic and Bloc Quebecois parties stick with their plan to defeat the Liberals and force a campaign over the holiday period.

Goodale said his Nov. 14 mini-budget, which includes C$30 billion in tax cuts over the next five years, is also designed as an election platform.

If the measures are adopted, the petroleum industry will have seen its income tax rate drop from 28 percent to 19 percent in three years, rewarding the Canadian Association of Petroleum Producers for years of lobbying to put the resource sector on the same footing as other industries.

The oil and gas sector paid C$3.5 billion in income taxes in 2004.

Other items in the so-called mini-budget which are welcomed by the industry include:

• A higher threshold income for small and medium businesses to C$400,000 from C$300,000 for corporate income taxes. Businesses falling short of that revenue level pay a lower corporate tax.

• An accelerated depreciation for machinery and equipment.

• C$8 billion over the next five years to promote the immigration and training of skilled workers, which is seen as vital as Canada shifts from conventional to unconventional oil and gas resources, notably in the oil sands.

But Goodale did not tackle the tax status of income trusts, saying that will wait until consultations with stakeholders are completed in December.

However, he promised to release those details even if a campaign is under way.