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NorthAmOil                                    COMMENTARY                                          NorthAmOil




       Canada’s oil and gas industry





       reacts to Ottawa’s share





       buyback tax plan







       Canada’s oil and gas industry is assessing the potential impact of Ottawa’s

       plan to tax share buybacks but is unlikely to be deterred from further
       buybacks in the future




        CANADA           CANADIAN  oil and gas companies have  unlikely to pass but it nonetheless illustrates a
                         warned the federal government that a tax on  growing appetite for taxing oil and gas company
       WHAT:             share buybacks could be detrimental to their  profits as they rise to new highs while people
       Canada’s oil and gas   business. However, the planned tax, which is due  struggle with high energy bills amid spiralling
       industry is assessing the   to come into effect in 2024, is unlikely to deter  inflation.
       impact of an upcoming   them from future stock buyback programmes.   Ottawa is taking a different approach as
       tax on share buybacks.  Ottawa unveiled its plan for the 2% tax on corpo-  it seeks to impose a tax on share buybacks –
                         rate stock buybacks earlier this month.  something the oil and gas industry has been
       WHY:                The Canadian government anticipates rais-  renowned for recently. But it is possible that
       The federal government   ing CAD2.1bn ($1.6bn) over a five-year period  the country’s oil and gas industry still considers
       plans to introduce a tax   from the tax. It appears that the tax will have a  itself to be targeted by Ottawa as it continues to
       on share buybacks.  particularly significant impact on the oil and  clash with the government of Canadian Prime
                         gas industry, which has been responsible for  Minister Justin Trudeau over the future direc-
       WHAT NEXT:        the most stock buybacks out of all industries.  tion of energy production and decarbonisation.
       Canadian oil and gas   Indeed, the industry’s initial reaction suggests
       companies are unlikely to   that some players think the tax is deliberately  Big on buybacks
       be deterred from future   targeted at oil and gas companies, which have  Canadian oil and gas companies have been
       share buybacks.   been reaping high profits on the back of stronger  heavily involved in share buybacks recently in
                         energy prices and demand this year.  line with much of the oil and gas industry more
                           Other countries are planning windfall taxes  broadly. This has come about as shareholders in
                         on oil and gas profits. Indeed, Canada’s neigh-  publicly listed companies have exerted increas-
                         bour, the US, has seen a proposed windfall tax  ingly more pressure on oil and gas firms to return
                         suggested by President Joe Biden. The Biden  cash to shareholders. Stock buybacks have been
                         administration is also planning to introduce a  one option for returning such cash to sharehold-
                         tax on share buybacks, but it would be lower  ers, along with higher dividend payments.
                         then what Ottawa is planning at 1%. The US’   CBC News noted recently that while stock
                         proposed windfall tax, meanwhile, is considered  buybacks represent a way to return cash to






















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