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Canadian Energy Sector Slams Trudeau’s Buyback Tax

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The oil and gas industry believes the federal government’s plan to tax share buybacks is a bad idea and could discourage investment in Canada’s energy sector.

According to BNN Bloomberg, the Canadian Association of Petroleum Producers (CAPP) issued a statement expressing concern that the policy gap between Canada and the United States could encourage investors to look elsewhere, specifically to countries with lower tax rates.

“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,” said the report.

In an email to BNN Bloomberg, Birchcliff Energy CEO Jeff Tonken shared the industry’s concerns when he said that the federal government in Ottawa was completely unaware of the needs of the oil and gas industry and the country’s 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,” said Tonken.

Enerplus CEO Ian Dundas was blunter in his judgment of Ottawa’s energy policy in the wake of global shockwaves caused by Russia’s invasion of Ukraine.

“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 stated in an email.

Since the tax won’t be implemented until 2024, it looks like the investment sector doesn’t think it will have much of an impact. Rafi Tahmazian, of Canoe Financial, emailed BNN Bloomberg and predicted that as share prices went up, the rate of share buybacks would drop.

“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,” he said. “An analogy would be it is like they are drowning and they’re more worried about what they are going to wear tomorrow.”

Original source material for this article taken from here

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Written by Olivia Woods

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