Excess Profits Tax: Joint Letter

Re: Open Letter to the Prime Minister and Finance Minister about an Excess Profits Tax on Oil and Gas Companies

Dear Prime Minister Carney, Dear Minister Champagne,

The war in Iran has led to a staggering rise in oil and gas costs around the world, and Canada is no exception. Although none of the oil and gas used in Canada is shipped through the Strait of Hormuz, its closure means that the multinational companies currently operating in Canada stand to profit from the consequences of the war, while the rest of the general public shoulder the burden.

We are all feeling the very real shock from increased oil and gas prices. As profits grow for multinational fossil fuel companies, the burden on households, families, small businesses, farmers, First Nations communities and municipalities also increases. Concretely, the rising price of oil and gas means families will spend less time together on vacation this summer, and more time working just to cover the bills. Farmers will make heartbreaking decisions about whether to continue paying for increasingly expensive fertilizer, or go bankrupt. Municipal libraries, pools and parks will forego essential renovations due to increased costs of fuel to run them.

Thus far, the federal government has failed to meaningfully shield everyday people, especially the most vulnerable, from these rising costs. As you know, life is now harder for millions of people across Canada.

The oil industry in Canada is set to make $90 billion in profits over the next year, according to analysis from the Canadian Centre for Policy Alternatives. This means about $10 million an hour in pure profit if prices remain at current levels. Those profits could be used sustainably, as reinvestments in Canadian communities, businesses or households. Yet they are disappearing, often into the pockets of American shareholders.

This is unsustainable given the very real cost of living challenges for average people. Which is why there is increasing support for an excess profits tax: in a recent poll, two thirds of Canadians, including three quarters of Liberal supporters, were found to be in favour of the introduction of a tax on oil and gas company excess profits, with revenues used to help lower energy bills for households.

And they are not alone: countries like the UK have implemented an excess profits tax on their oil and gas companies since 2022. Revenues generated from the UK’s tax have been used to shield residents from the increasing costs of fossil fuels.

We encourage your government to emulate our UK allies and implement a 75% excess profits tax on the oil and gas industry which, if levied on profits 120 percent above pre-crisis profit levels, could generate $40 billion of revenue for Canada while still ensuring billions in excess profits for companies’ shareholders.

These funds could support impacted households via a direct household rebate, to improve essential services and infrastructure or to fund the new Canada Sovereign Wealth Fund. The additional revenue could also be used to fund a national resilience and recovery strategy needed to keep our communities and our economies safe, or cover the cost of much-needed electricity grid upgrades across the country.

An excess profits tax is necessary, feasible and popular. It reflects the Liberal platform’s commitment to make polluters pay, as well as improve the well-being of households affected by the increased cost of living. As your government seeks to advance its agenda, will you commit to directing the Department of Finance to examine options for the implementation of a 75% excess profits tax on oil and gas companies in the upcoming federal budget?

We would welcome a conversation with your office about the excess profits tax and the ways revenue generated from that measure could be invested in shielding the public from the rising cost of living.

Yours sincerely,