Oil and gas taxes pay for a lot of government spending

Mark Milke and Lennie Kaplan, Financial Post, September 24, 2021

 Between 1969 and 2019, Canadian parents received $499 billion in family allowance payments and children’s benefits from the federal government. That 50-year cost was matched almost exactly by $505 billion in revenues to governments from the oil and gas sector. That included everything from oil and natural gas royalties, to property taxes, to corporate and personal income taxes paid by those in the oil and gas sector — except that such taxpayer cash was collected over just 20 years, between 2000 and 2019.

It’s not literally true, of course, that oil and gas revenues went to pay family allowances and benefits. Money is fungible and plenty of other taxes flow into government coffers. There are also many other things that Canada’s governments spend tax dollars on, from health care to highways to heritage and much else.

But putting child benefits side-by-side with oil and gas revenues provides a concrete comparison for those who know little about taxes and government spending, or perhaps even mistakenly think governments can spend, spend, spend with little regard for the strength of a major Canadian industry.

Oil and gas revenues: As much as real estate and construction combined

Consider another comparison, this time to other major Canadian industries. Real estate and construction are also major contributors to government revenues. Between 2000 and 2019, the real estate sector contributed just over $211 billion in taxes to governments across Canada, or about two-fifths of what oil and gas did. Over the same two decades, the construction sector handed over $298 billion to federal, provincial and local governments, or about three-fifths of what those involved in the natural gas business and the oil industry did.

Add the contributions from real estate and construction together and that doubled-up figure — over $509 billion — barely tops the $505 billion in cash Canadian governments received from oil and gas companies and employees between 2000 and 2019 (the latest year for which data is available).

We’re conservative on our estimates

A few caveats on the comparisons. The $505 billion from oil and gas is just oil and gas taxes and royalties to local, provincial and federal governments but does not include payments to First Nations. Also, we were unable to track personal income tax payments from oil and gas workers to provincial and federal governments between 2000 and 2006. (Statistics Canada was not able to provide us an estimate for those years for oil and gas workers.) In other words, even the half-trillion bonanza of revenue from the oil and gas sector is a conservative estimate.

Here are some other statistics to keep in mind when considering the importance of oil, gas and energy to governments. The broad energy sector includes oil and gas extraction and support activities, as well as utilities, coal and pipeline transportation. Total energy revenues between 2000 and 2019 were $701 billion (including the $505 billion from oil and gas), or more than total federal spending ($685 billion) on employment insurance between 1987 and 2019.

If Canada’s oil and gas sector disappeared tomorrow, as some activists seem to want, and governments were forced to find $505 billion in tax cash for the next 20 years, they might consider raising personal, business, payroll or sales taxes, or some combination of the above. But they’d need to find $25 billion per year to replace oil and gas revenues.

Mark Milke and Lennie Kaplan are with the Canadian Energy Centre, an Alberta government corporation funded in part by carbon taxes. They are authors of the report, “$701 billion: The Energy Sector’s Revenues to Canadian Governments 2000 – 2019.” Image credit: Pixabay.