Political FinancingThere are two ways tax dollars are used to support political parties. Provincially Manitoba and Quebec provide parties with grants based on the number of votes received although in Manitoba both the NDP and Conservatives have refused to accept the grants. Federally a similar system was introduced in 2004 when donations by unions and business were made illegal; the Harper government is phasing out these grants with the last payment scheduled for April 2015. Many think that change was made because the Conservatives fund-raising machine is much better than that of the other parties but it is also true that the grants were not popular with the public. In the absence of those grants, individual contributions are vital for all political parties. It is arguable that even individual donations involve public subsidy since the tax credits they earn are far in excess of charitable tax deductions.
Tax credits are made available for both provincial and federal political donations. Unlike a deduction from income which is how charitable donations are treated, tax credits are deductions directly from taxes owing. In British Columbia a donation to a registered political party earns a 75% tax credit on the first $100 donated, 50% on amounts over $100 and under $550, and 33 1/3% on amounts in excess of $550 to a maximum credit of $500. A donation to a federal party earns a $75% tax credit on the first $400 donated, 50% on amounts over $400 and under $750, and 33 1/3% on amounts over $750 to a maximum credit of $650. In BC those who donate a cumulate amount of $250 or more annually have their names disclosed in an online searchable database; there are no limits on union or business donations. Only individual donations are permitted federally and there are limits to the cumulative amount any person can donate over a year. As with provincial donations, the names of federal donors can be seen in an online searchable database.
Donors to any political party might be particularly interested in how much their MLAs and MPs donate. Since first names appear in a variety of forms, it is best to start by searching the databases by last name and then modify the search to include the first name and any initials used in the disclosure. For example, if you search the Elections BC file on "Clark" for 2013, you'll find Christy Clark gave $1,453.86 in 2012 but she apparently didn't give over the $250 disclosure limit in any prior or subsequent year. A search on most NDP MLAs reveals donations of $100 per month. That has been what the party has expected of its MLAs for over 25 years despite MLA salaries more than doubling over that time. In 2012, John Horgan donated $1,240 to the BC NDP; in 2013 he gave $1,825. Mable Elmore is an exception to the $100 per month rule; in 2012 she gave $2,335 and in 2013 she gave $2,575. Jenny Kwan gave $1,895 in 2012 and $1,775 in 2013.
I was curious what the declared candidates for the NDP federal nomination in Vancouver East gave to the federal NDP. I couldn't find any disclosed donations for either Jenny Kwan or Mable Elmore. I haven't check the entire list, but it appears most MLAs just donate to the provincial party.
Some might say these matters are an irrelevant distraction to the nomination campaign in Vancouver East, yet the members whose votes are being courted receive countless phone calls and emails from both the provincial and federal NDP asking for support. Many of us respond generously, noting that a $400 federal contribution only costs $100 after the tax credit.
January 9, 2015
LNG Price TrendGovernment revenue claims with respect to LNG cannot be realized with today's prices but what is more important is final investment decisions may be postponed until prices recover, meaning there won't be any LNG revenue for BC for years to come.
In December 2014 Reuters reported: "Asian spot LNG prices LNG-AS have more than halved since the start of the year to below $10 per million British thermal units (mmBtu)." It also said that according to David Hewitt, co-head of global oil and gas equity research at Credit Suisse: "Average import prices into Japan, the world's top buyer, are forecast to fall to about $11 per mmBtu next year, down from an estimated $15.50 this year and $16.45 in 2013, if Brent crude averages around $75 a barrel." When Finance Minister Mike de Jong introduced BC's Liquefied Natural Gas Income Tax Act on October 21st he assumed a price of $12.50 per mmbtu at the BC LNG facility outlet (add transportation costs to Asia of at least $0.80/mmbtu to that plant gate price). Brent crude closed under $50 this week. BC isn't going to be able to sell $13.30 mmbtu LNG into a market that is pricing it below $11.00 and just as oil companies are reducing their capital spending in response to falling prices, LNG investors will postpone their decisions.
de Jong issued a news release on the Act together with a slide presentation. That presentation showed an estimate of approximately $800 million per year in provincial taxes and royalties as a result of a 12 million tonne per year LNG facility. I submitted a freedom of information request for the assumptions and calculations that support that estimate and have now received a full response, not a word was redacted.
The ten year projection for the hypothetical 12 MTA plant shows annual government revenue of $250 million in royalties, $293 million in corporate income tax (net of a $15 million in CIT natural gas credit) and $225 million in other taxes (property taxes, provincial sales tax and motor fuel tax). That totals $768 million per year for the first three years after which the LNG tax is assumed to provide a further $54 million a year for the next three years, increasing to $117 million in year 7 and to $125 million per year thereafter for a total in year 10 of $893 million.
If prices in Asia remain under $11.00/mmbtu, then at the plant gate in BC production would have to be economic at under $10.20/mmbtu (netting out shipping costs). Thatís a $1.38 billion hit to the revenue line in the government's hypothetical 12 MTA LNG plant with no offsetting reduction in costs. The government argues short term price fluctuations are not especially relevant when multinationals are making 20 to 30 year multi-billion dollar investment decisions. Tell that to the oil companies that are cutting their capital spending plans for 2015. It is likely that LNG investors will take some time to see how prices trend.