Japan Urges Canada’s British Columbia to Cut Tax Related to LNG Projects

From PLATTS

Japan’s Ministry of Economy, Trade and Industry Monday urged the British Columbia government in Canada to cut the rate of taxes it is planning to impose on proposed LNG projects in the province, a METI source told Platts.

During the second round of a high-level policy dialogue in Tokyo between the two sides, senior METI officials asked Steve Carr, deputy minister of BC’s Ministry of Natural Gas Development, to have his province consider lowering the rate of its planned LNG income tax, as well as the rates of any other taxes related to LNG projects, such as corporate and carbon taxes and royalties, the source said.

BC government officials told their METI counterparts that the province would take the points being made into consideration when they finalize details on their taxation plans regarding the LNG projects, the source said.

During the meeting, the METI officials also sought clarity from the BC government delegation on Japan’s hopes that Canada’s LNG projects will be competitive against US projects, the source said. He added that the prices of prospective US supplies are expected to be some 30-40% below current market levels.

METI’s requests came after the BC government said February 18 that the province plans to introduce a two-tier LNG income tax, with the legislation to be introduced to parliament by “fall 2014″ and ready for introduction in 2015.

The BC government has said it plans to set a Tier 1 tax rate of up to 1.5% on net proceeds after the startup of commercial operations and a Tier 2 tax rate of up to 7% once an operator has recovered the full 100% of capital investment.

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