Reuters report that in the upcoming budget for companies, the federal government plans to cater new tax breaks that will look to set-up LNG export terminals. Based on an ATI request, this insight on the internal records has come to light that is only obtained by Reuters.
New proposals by the Canadian Association of Petroleum Producers (CAPP) are to boost the companies with the incentives. These companies may have stalled LNG development amid the falling oil prices, added Reuters. This is the aim of the new tax breaks.
All the LNG plants would qualify as the manufacturing assets, says the tax breaks reports. However, under the new proposal the write offs 30 – 50 percent would be authorized of the total capital investment per year.
This sort of classification has been around since 2007. The entire document obtained by Reuters was prepared based on the meeting with the industry representatives in last October.
Many companies believe and have constantly complained that LNG development cost is extremely high but the margin is small. The proposal is formed and declined during the last two federal budgets.
Under the current classification, LNG facilities will be able to write off 8 percent of the total capital investment each year. The next one is due in April 2015. If the proposal was functional it would have cost the federal government hundreds of millions of dollars in tax revenue.
If the proposal gets approved, CAPP’s $3 billion would be added to Canada’s GDP. But the incentives remain unclear for companies to develop a footing on LNG development while the markets remain unstable.
The NEB has approved 10 LNG export licenses with another 10 applications to pass by. None of them has been made final yet.