CANADIANS BRACED FOR FEDERAL TAX INCREASE

Feb. 19, 1990
Major Canadian oil companies are bracing themselves for an expected increase in a new corporate tax in a federal budget. The large corporations tax introduced Jan. 1 at a rate of 0.175% of assets, is set to rise in June to 0.2% of assets. The tax is based on a formula used to assess the worth of corporate assets.

Major Canadian oil companies are bracing themselves for an expected increase in a new corporate tax in a federal budget.

The large corporations tax introduced Jan. 1 at a rate of 0.175% of assets, is set to rise in June to 0.2% of assets. The tax is based on a formula used to assess the worth of corporate assets.

Petroleum industry spokesmen say the tax is regressive and applied unevenly to companies. Factors used in the calculation include the age of reserves, prices paid in property acquisitions and takeovers, and accounting methods used to state asset values. Companies producing from older reservoirs, for example, pay less tax because the reserves have lower book values than more recent discoveries.

A survey conducted for the Independent Petroleum Association of Canada by Woodside Research Ltd. showed wide variations between tax levels and income.

Canadian industry officials say the tax will hurt petroleum activity because it will cut into cash flow available for projects.

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