Energy sector blasts Trudeau’s buyback tax

Industry association claims differences with U.S. policy might drive away investment in the Canadian energy space

Energy sector blasts Trudeau’s buyback tax

The Canadian oil and gas sector claims the federal government's proposal to tax share buybacks is off the mark and might deter investment in the domestic energy sector.

The Canadian Association of Petroleum Producers (CAPP) warned in a statement that the difference between Canadian and American policies might drive investors away from Canada and toward countries with lower tax rates, reported BNN Bloomberg.

“The 2% tax rate is double than what is being considered in the United States and may have the unintended effect of discouraging investment into Canadian-run businesses while putting the shareholder returns of Canadian investors at risk,” it said.

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Industry insiders mirrored that assessment, and in an email to BNN Bloomberg, Birchcliff Energy CEO Jeff Tonken claimed Ottawa was oblivious to the requirements of both the oil and gas sector and the whole economy.

“The new tax goes directly against what is currently federal policy. On the one hand the liberal government is trying to stop the use of fossil fuels and is doing everything it can to stop its use … and on the other hand comes out and says, don’t buy your stock back invest in your business,” Tonken said.

When discussing how Ottawa has handled energy policy in a globe shook by the effects of Russia's invasion of Ukraine, Enerplus CEO Ian Dundas was more direct.

In the past, Dundas has been a vocal critic of federal policies and has almost completely sold off the Canadian assets of his business.

“It’s truly tragic. The way forward (and there is a way forward – even though there are no quick fixes) should be based upon serious energy policy focused on things that will help encourage investment and increase supply – i.e. stable and well understood regulatory approval processes would be a good start. But higher taxes?  Higher taxes have never been a path to increasing the supply of anything,” he said in an email to the news outlet.

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Given that the tax won't go into effect until 2024, the investment sector appears to believe it won't have a material effect. But share buybacks will probably slow down as share prices climb, according to Rafi Tahmazian of Canoe Financial, who wrote to BNN Bloomberg in an email.
“Not sure that the glorification of the tax is got any relevance to the problem at hand. This tax is expected to bring $2.1 billion starting in 2024. Can’t understand the relevance to the issues we are facing today,” Tahmazian said. “An analogy would be it is like they are drowning and they’re more worried about what they are going to wear tomorrow.”