A STUDY OF FEDERAL SUPPORT TO THE FOSSIL FUEL SECTOR
spending on energy production from fossil fuels was $40.4 billion, but that support provided through the tax system could not be estimated. The Commissioner’s 2000 study examined three categories of tax expenditures available to the oil and gas and mining sectors:
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• accelerated deductions; • flow-through shares; and • the resource allowance for the non-deductibility of Crown
royalties and mining taxes. Overall, the study found that, with a few exceptions, federal government support for energy investments, including support through the tax system, did not particularly favour the non-renewable sector over the renewable sector. The exceptions included investments in oil sands and coal mines, where significant tax expenditures were available. Paragraph 4.83 provides more information on these tax expenditures available to the fossil fuel sector. The 2000 study cautioned that estimating total federal tax expenditures is complex, partly due to methodology issues and data gaps. For example, the estimation of tax expenditures must take into account the unique tax situation of each company. In addition, providing aggregate estimates with a reasonable degree of accuracy can be extremely labour intensive and requires isolating data specific to each project and corporation.
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The study found that Finance Canada was not collecting data needed to estimate total tax expenditures related to accelerated deductions for the oil and gas sector. Finance Canada has noted that no widely accepted method exists for estimating these tax expenditures. The study encouraged the Department to explore other ways to estimate the total cost of tax expenditures, including accelerated deductions.
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In 2004, the Commissioner conducted an audit that examined how the government uses the tax system to achieve its sustainable development commitments. The audit identified gaps in the assessment of the environmental impacts of tax expenditures. Finance Canada noted its commitments to continue to evaluate research concerning environment-related tax expenditures and to assess the potential for using the tax system to help the government meet its environmental objectives. A Framework for Evaluation of Environmental Tax Proposals, published in 2005, outlines the criteria for evaluating environmental tax proposals.
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Report of the Commissioner of the Environment and Sustainable Development—Fall 2012
Chapter 4
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