Last week, British Columbia’s Finance Minister Carole James introduced legislation she says will encourage more development through a natural gas tax credit and by changing the province’s tax structure. Under the changes, the government would amend the Income Tax Act to implement the tax credit for liquefied natural gas development. It would also repeal the Liquefied Natural Gas Income Tax Act, which it says created barriers for investment and left the province open to footing the bill for special industry tax and regulatory protections.
In a statement, the Minister said, “British Columbians are counting on us to attract LNG investment that meets strict conditions: delivering jobs and financial benefits to B.C., creating economic partnerships with Indigenous peoples, and protecting our clean air, land and water. This legislation completes the process of creating a fiscal framework that invites investment while supporting those conditions.”
The Finance Ministry said the previous LNG income tax was removed because it created uncertainty and risk to investors but the natural gas tax credit has been retained to encourage companies to pay provincial corporate income taxes.
In October, LNG Canada announced plans for a $40-billion project in Kitimat. The government said the tax changes will provide the fiscal framework needed for the project, which is expected to create 10,000 construction jobs and up to 950 permanent jobs in the processing terminal.
The new tax credit would go in effect on January 1, 2020 to qualifying companies and would be calculated at 3 percent of the cost of natural gas. Qualifying corporations are those with a principal business involving oil and gas exploration, development, refining marketing or liquefaction of natural gas. The tax credit could potentially be used to reduce B.C.’s corporate income tax rate from 12 to 9 percent.
The Business Council of British Columbia supported the changes and said they will allow the province to compete in LNG markets around the world. President and CEO Greg D’Avignon said in a press release, “If we as a province are purposeful and apply this same competitive lens to all our natural resource, technology and energy export sectors we can become the low carbon supplier of choice globally. The resulting economic growth will create higher wage jobs, stronger communities and more government revenues to support the quality of life and services British Columbians expect.”