Canada already is the most decentralized federation on the globe. But the oil boom centered in Alberta is leading to even greater decentralization, creating ever more interprovincial and regional disparities and inequalities.
Here are just some of the staggering statistics in a new report, The Petro Path Not Taken, by Bruce Campbell, executive director of the Canadian Centre for Policy Alternatives. All are from publicly available sources:
In 2002, Alberta’s per capita GDP was 10 per cent above the Canadian average. By 2010, it was 49 per cent above the Canadian average.
Seventy-six per cent of the total North American GDP benefit from the tar sands occurs in Alberta, 20 per cent in the U.S. — and only four per cent in the rest of Canada.
Projected future tar sands GDP benefits to the U.S. are five times greater than to the rest of Canada outside Alberta. The U.S. enjoys employment benefits from our tar sands development — wages and salaries — that amount to four times the benefits going to the rest of Canada.
Three states — California, Texas and Wisconsin — see a greater employment benefit from Alberta’s tar sands than the combined benefit to all provinces excluding Alberta.
The oil and gas sector’s effective tax rate is just seven per cent.
Subsidies to the oil industry by both levels of government totalled $2.8 billion in 2008. Alberta received $2.1 billion, or 73 per cent, of those subsidies. Half of that subsidy money came from Ottawa.
Oil companies take as much as 65 per cent of total tar sands revenue; Ottawa captures a maximum of 10.6 per cent.
Ottawa’s only direct access to oil revenues is through the 15 per cent corporate income tax, a rate lowered from 28 per cent in 2000.
In 2010, Alberta collected just 11 per cent of the tar sands’ economic rent, or excess profit.
In January 2002, manufacturing made up 17.2 per cent of Canada’s GDP. By August, 2012, that figure had dropped to just 12.9 per cent.
Between 2002 and 2011, Canada lost 531,000 manufacturing jobs.
While Canada’s merchandise trade surplus fell into deficit in the last three years, Alberta’s rose from $23 billion in 2002 to $83 billion, dropping to $70 billion by 2011.
As the world oil boom was wreaking havoc on interprovincial equity, Ottawa was vitiating Canada’s constitutionally-entrenched system of equalization.
In December, 2011, Ottawa cut the federal formula for health transfers from six per cent annually to nominal GDP growth, estimated at roughly four per cent. This means provinces lose $36 billion for the 10-year renewal period beginning in 2017-18.
Equalization payments are to be cut by over $3 billion annually compared to the old program. The 2009 equalization formula set total payments as a percentage of a GDP ceiling (a three per cent moving average) instead of a national standard.
This deepens interprovincial inequality. And it’s only just beginning. Alberta’s fiscal capacity could reach 180 per cent of the national average by 2020 and even higher if tar sands growth continues at its current pace.
Meanwhile, the Council of the Federation — the body representing Canada’s 13 premiers and territorial leaders — estimates the revenue loss from all transfer cuts from 2014-15 to 2018-19 will be $23.3 billion. Reduced rates of growth will continue beyond 2019.
Canada’s growth in inequality is among the highest in the 34 nations belonging to the Organization for Economic Cooperation and Development. Currently, Canada ranks 26th out of 34 in equality.
The richest one per cent of Canadians took home almost one-third of all the gains in national income from 1997 to 2007 — third highest in the OECD.
Unionization rates have dropped from 36 per cent in 1989 to 30 per cent; union density in the private sector has fallen to 16 per cent.
Robin Boadway, the David Smith chair of economics at Queen’s University, says the idea that Ottawa has no access to resource revenues is true politically — not constitutionally. Ottawa effectively has no access to resource revenue in the current political climate. Through ideological belief (or fear), its only access to the tar sands windfall — and all other resource windfalls — is through the now much-diminished general 15 per cent corporate tax.
“The section that gives the provinces the right to levy resource taxes doesn’t deny the federal government that right,” says Boadway. “The federal government has a provision in the constitution which gives them the right to levy any kind of tax they want. So it’s really a question of politics rather than the ability to do it.”
Although the provinces own the resources on their lands, he says, “the federal government, nonetheless, could impose a tax on these resources if it wanted to … (T)here’s no reason why the federal government can’t tax private resource firms.”
While other federations have been centralizing, Canada has been decentralizing. “The provinces in Canada are respoonsible for a much higher proportion of their revenue-raising than is the case in other federations like Australia, Germany and even the U.S.,” Boadway says.
Boadway also says Canada is likely the most decentralized federation in the world now. And he admits to being worried about the future “because this process of decentralization has been in place for many years.
“It’s getting worse because of this natural resource boom … I think it puts pressure on the national fabric when you have these regional inequalities that are getting bigger and bigger and the will to deal with them becomes less and less because it becomes much more difficult for the federal government to deal with them.”
Canada’s highly decentralized federation creates another problem for its citizens, Boadway continues. “The trouble is things that provinces do, 80 per cent of their expenditures are on things like health, education and welfare, which are things that are in our national interest … It’s part of the social citizenship to have those things provided comparably among provinces.”
He finds it surprising that none of Canada’s political parties are willing to address this issue. “I’m completely flummoxed.”
He fears matters will “end badly” — by which he means that Canadians “will lose our social citizenship, we’ve competed-down our social justice system. We’ve got a situation where people in different parts of the country have access to very different levels of public services, contrary to what it says in the Constitution, where we become a diverse country of individual provinces where people care more about themselves within their own provinces and don’t care about the others …
“(Believing) in social citizenship for everybody is lost when we get so decentralized.”
Original Article
Source: ipolitics
Author: Frances Russell
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