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Big Fossil Companies Pay Taxes at Lower Rate Than Most Canadians

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Some of Canada’s biggest fossils are paying a lower tax rate than someone in Ontario earning a below-average personal income, Canadians for Tax Fairness concludes in a recent report.

“Some of Canada’s largest oil, gas, and pipeline companies are using offshore tax havens” to pay taxes to federal and provincial governments at effective rates as low as 12.89% a year—barely half the 24.25% rate for an individual earning C$42,201 a year in Ontario, Environmental Defence writes in a blog post. (For reference, Ontario’s average individual income was nearly $51,000 in 2016.)

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Canadians for Tax Fairness found that the use of more than 1,000 overseas subsidiaries allowed the 60 biggest companies trading on the Toronto Stock Exchange to collectively avoid paying $10 to $15 billion per year in taxes to Canada’s federal and provincial governments.

“Suncor, Canada’s largest tar sands producer, paid a 15.86% tax rate on its $35 billion in profits,” the post observes. “TransCanada, the pipeline company behind Keystone XL, paid 15.52% on its $18.3 billion in profits; Enbridge [2], the operator of North America’s largest crude oil pipeline network, paid 14.24% on $12.1 billion; and Canadian Natural Resources Ltd., Canada’s second-largest tar sands producer, paid just 13.58% on $31 billion in profit.”

Even so, those companies positively gushed taxes compared to Canadian Pacific Railway Ltd., which managed to pay just $22 million on $1.8 billion profit, an effective rate below 2%.

The findings are likely an underestimate, Environmental Defence’s Patrick DeRochie adds, “as access to company tax data is limited due to secrecy and poor government transparency, both in Canada and in the tax haven nations.”

The techniques the companies used “are not necessarily anything illegal,” he emphasizes. But they do show “that our corporate tax laws fail to prevent Canada’s biggest companies from using tax havens for tax avoidance.”

Canada’s fossils, in particular, are making out on the taxpayer dime both coming and going. In addition to avoiding billions in taxes, Environmental Defence notes, “they receive $3.3 billion in fossil fuel subsidies from Canadian governments every year.” (The International Monetary Fund has put the figure closer to $46 billion [3].)

The G20, including Canada, committed in 2009 to phase out such perverse subsidies, and Prime Minister Trudeau appeared to reaffirm [4] the promise last year. “However, the 2017 federal budget cut fossil fuel subsidies by only $50 million per year,” Environmental Defence finds, “a tiny fraction of the annual total given to the polluting fossil fuel industry.”