Canada Moves to Phase Out Tax Break for Tar Sands Producers

Canada announced intentions yesterday to phase out the tax break for oil sands producers that allows them to write off investment costs, setting a final deadline of 2015 for the changes.

Finance Minister Jim Flaherty said the tax break, instituted in 1996, was no longer necessary due to the high price of crude oil. He offered an extension of the accelerated capital cost allowance for energy-efficient equipment as an alternative, intended to promote investment in technologies like carbon capture and storage. That credit was due to expire in 2011; instead it will continue until 2020.


The investment tax break will be grandfathered in for major projects that began construction before yesterday, and the several projects that have been approved but not yet begun construction will be eligible for accelerated write-offs until 2010, with gradual adjustments to the normal capital cost allowance by 2015.

The credit’s elimination will generate about C$300 million per year starting no sooner than 2010, the government estimated. Flaherty also announced a C$60 million plan to streamline the approval process for major resource projects by creating a Major Projects Management Office (Shawn McCarthy, Toronto Globe and Mail).

Greenwire