Norwegian Prime Minister Erna Solberg declares that the Norwegian economy will continue to thrive. Finance Minister Siv Jensen has already delivered a budget that features increased spending, tax cuts and a surplus.
How is this possible in a country of only five million people (Alberta has just over four million) that produces less oil than Alberta but also has to deal with the unpredictability of roller-coaster oil prices?
The Norwegians pay very high taxes, including a 25-per-cent sales tax, but they also have well-funded social programs — in Norway the term “welfare state” is not a pejorative. The government doesn’t resort to cutting health care, education and social service programs when the price of oil slides.
And they don’t run deficit budgets.
There is universal child care. Post-secondary education is free. Seniors receive generous pensions and there is abundant public housing
The Norwegians have also managed to save almost $900 billion (U.S.) — the largest sovereign wealth fund in the world — since offshore oil was discovered in their waters in the late 1960s. Norway doesn’t take a royalty share of its oil and gas production like Alberta. Instead, the government heavily taxes the petroleum producers’ profits, takes a substantial equity share in many projects and earns stock dividends from a government-controlled oil and gas company.
Tax revenue from the petroleum sector accounts for about 30 per cent of government revenues, but this revenue is not based on royalties (taxes) per barrel of oil produced and it is not tied to the fluctuating price of oil, as in Alberta. Instead, oil and gas companies operating in Norway pay a 28 per cent corporate tax plus a 50-per-cent petroleum tax on profits, for a total tax of 78 per cent.
In Alberta, petroleum companies pay a royalty per barrel produced to the provincial government, a 10-per-cent corporate tax rate and a 15-per-cent federal corporate tax.
But oilsands developers pay only minimal royalties (as low as one per cent) until they have recovered capital costs. That can take up to 10 years, and if there are cost overruns and delays it can take even longer.
At this point, about 60 per cent of Alberta oilsands projects are paying the minimal royalty rate.
So instead of taming the impact of volatile oil prices like the Norwegians do, Canada rides the stomach-churning roller-coaster of unpredictable pricing that can shrink government revenues and knock the wind out of our dollar in a very short time.
Canada once had a state-owned oil company, Petro-Canada. Even in Alberta, premier Peter Lougheed established the Alberta Energy Company in 1973. But by the 1990s, after vocal opposition from the petroleum private sector and right-wing conservatives, both companies were privatized, leaving the Canadian and Alberta governments without a direct interest in oil and gas development.
more
Unlike Alberta, Norway’s economy insulated from falling oil prices | Toronto Star
How is this possible in a country of only five million people (Alberta has just over four million) that produces less oil than Alberta but also has to deal with the unpredictability of roller-coaster oil prices?
The Norwegians pay very high taxes, including a 25-per-cent sales tax, but they also have well-funded social programs — in Norway the term “welfare state” is not a pejorative. The government doesn’t resort to cutting health care, education and social service programs when the price of oil slides.
And they don’t run deficit budgets.
There is universal child care. Post-secondary education is free. Seniors receive generous pensions and there is abundant public housing
The Norwegians have also managed to save almost $900 billion (U.S.) — the largest sovereign wealth fund in the world — since offshore oil was discovered in their waters in the late 1960s. Norway doesn’t take a royalty share of its oil and gas production like Alberta. Instead, the government heavily taxes the petroleum producers’ profits, takes a substantial equity share in many projects and earns stock dividends from a government-controlled oil and gas company.
Tax revenue from the petroleum sector accounts for about 30 per cent of government revenues, but this revenue is not based on royalties (taxes) per barrel of oil produced and it is not tied to the fluctuating price of oil, as in Alberta. Instead, oil and gas companies operating in Norway pay a 28 per cent corporate tax plus a 50-per-cent petroleum tax on profits, for a total tax of 78 per cent.
In Alberta, petroleum companies pay a royalty per barrel produced to the provincial government, a 10-per-cent corporate tax rate and a 15-per-cent federal corporate tax.
But oilsands developers pay only minimal royalties (as low as one per cent) until they have recovered capital costs. That can take up to 10 years, and if there are cost overruns and delays it can take even longer.
At this point, about 60 per cent of Alberta oilsands projects are paying the minimal royalty rate.
So instead of taming the impact of volatile oil prices like the Norwegians do, Canada rides the stomach-churning roller-coaster of unpredictable pricing that can shrink government revenues and knock the wind out of our dollar in a very short time.
Canada once had a state-owned oil company, Petro-Canada. Even in Alberta, premier Peter Lougheed established the Alberta Energy Company in 1973. But by the 1990s, after vocal opposition from the petroleum private sector and right-wing conservatives, both companies were privatized, leaving the Canadian and Alberta governments without a direct interest in oil and gas development.
more
Unlike Alberta, Norway’s economy insulated from falling oil prices | Toronto Star
