O&G made up nearly half of AB corp. tax revenue last year

But UCP supporters probably shouldn’t be celebrating just yet.

Last week, Alberta Treasury Board and Finance released data on corporate income tax revenue over the last 8 years.

Under the New Democratic Party’s administration, the tax on corporate profits over half a million dollars was 12%, the third lowest rate among all 10 provinces.

Shortly after the United Conservative Party won the 2019 election, they lowered the corporate income tax from 12% to 11%. In January 2020, they lowered it further to 10%. In the early months of the pandemic, they dropped it even more, to 8%, the lowest rate in Canada and one of the lowest in North America.

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During the 2022–2023 budget year, Alberta collected $8.185 billion in revenue from the profits of corporations operating in the province.

The previous year, corporate profit tax revenue was $4.240 billion. Over the last year, revenue from the corporate profit tax nearly doubled from the previous year.

Here’s a look of revenue each year since 2015–2016, the first year the NDP were in power.

During the first 5 years in this reporting period, revenue remained pretty static, hovering around the $4 billion mark.

There was a huge drop during the first year of the COVID-19 pandemic, when it plummeted to a little more than $2.5 billion, but then climbed back up the next year to that $4 billion and a bit mark.

So, what’s the deal? Why after 6 years of averaging around $4 billion did revenue more than double last year?

Honestly? It’s oil.

Tax revenue from corporate profits in the oil and gas extraction sector last year was $3.765 billion, 46% of total revenue collected from all sectors.

Last year, it was only 16.65% of all revenue.

Check out what it was every year over this reporting period.

Nowhere in the previous 7 years has the oil and gas extraction sector accounted for anywhere near as much of the total corporate tax revenue as it did last year. In fact, it never even hit half that amount in any of these years.

What’s going on? Are UCP policies leading to more economic activity in the oil and gas sector?

Well, not really. Here’s a chart of the price of West Texas Intermediate crude oil during the same period.

Notice anything?

Let’s combine these two charts, so you can see what I’m getting at.

What we see here is a correlation between the price of oil and the percentage of corporate profit tax revenue collected from the oil and gas extraction sector.

As the price of oil rises, so does the percentage of tax revenue. As the price of oil drops, so does the percentage of tax revenue.

It seems that the reason why the oil and gas sector made up so much of the corporate profit tax revenue last year is because the price of oil was over $100 a barrel for nearly the entire first half of 2022.

The higher the price oil climbs, the more revenue oil companies make. The more revenue those companies make, the more they’ll have left over after they deduct their expenses.

And revenue left over after expenses, my dear reader, is the definition of profit. The higher these companies make in profits, the more the government brings home in tax revenue. After all, 8% of $1 billion is more than 8% of $100 million.

Is this something we can see in the future?

Well, the price of oil tends to oscillate, as you can see in the graphs above. And it’s been over a year since we’ve been above $100 a barrel. In fact, WTI has been under $80 a barrel since mid-April this year, and it even dipped below the $70 mark a handful of times during that same period.

Unless the price of oil skyrockets again, I anticipate that the amount of corporate profit tax revenue collected from the oil and gas extraction section this year, as well as the percentage of total revenue that amount makes up, will likely be lower than last year.

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By Kim Siever

Kim Siever is an independent queer journalist based in Lethbridge, Alberta. He writes daily news articles, focusing on politics and labour.

2 replies on “O&G made up nearly half of AB corp. tax revenue last year”

Would that we could actually collect royalties like other petro-states!!!

Finally oil and gas is paying up….somewhat. In most places their taxes would double that. They are still paying a lot less than Norway…and giving us a ton of pollution to deal with….subtract that from their taxes and they pay very little..

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