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Government ignored advice opposing huge subsidy program - leaked document

February 28, 2019
Government ignored advice opposing huge subsidy program - leaked document

CALGARY, AB: leaked briefing note shows expert analysis warned about risks with the Notley government’s plan to give hundreds of millions of dollars in subsidies to petrochemical companies. The Ministry of Finance produced the Minister Briefing Note, dated Nov. 18, 2015, for Finance Minister Joe Ceci. The Canadian Taxpayers Federation obtained the document from an anonymous source.

“More than three years ago, experts at the Ministry of Finance were already warning the government about wasting hundreds of millions in taxpayers’ money on corporate welfare,” said Franco Terrazzano, Alberta Director for the CTF. “The Alberta government ignored this expert advice from the civil service, is now giving handouts to select businesses and raised taxes on Albertans.”

The briefing note provides analysis on the Hydrocarbon Value-Add Program, a precursor to the Petrochemical Diversification Program, including the following key messages:

  • “Given the current fiscal situation and the financial pressures facing the Government, it would be questionable to introduce subsidies to the petrochemical industry at this point.
  • “The proposed incentive program cannot be justified on economic merit alone, as the program costs are expected to be higher than the added revenues.
  • “Alberta's tax system is focused on keeping taxes low for all industries. The proposed incentive program means Government is selecting certain stakeholders to receive direct support.
  • “In addition, there is no guarantee that the incentive program will actually lead to additional investment and could benefit projects that would have gone ahead regardless of the incentives.
  • “The proposed program could induce other companies or industries to demand tailored support programs from Government in the future.”

The Alberta government has since committed to spending billions of dollars through its energy diversification programs, including $1.1 billion in royalty credits through the Petrochemicals Diversification Program. The government has also committed to spending $1 billion in loan guarantees and grants through the Petrochemical Feedstock Infrastructure Program and $1 billion in loan guarantees and grants through the Partial Upgrading Program.

“Alberta’s economic strategy has focused on corporate welfare, not competitiveness,” said Terrazzano. “The government should keep taxes low for everyone instead of giving subsidies to hand-picked businesses.”

The government briefing note released by the Canadian Taxpayers Federation can be found here.

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