Documents Reveal Industrial Forestry Sector a Drain on Public Finances

25 JUNE 2014

Documents released by the courts to Green Party leader David Coon reveal that the New Brunswick and federal governments will lose corporate tax revenue as a result of J.D. Irving's promised investments in it operations. 

"This is not a question of the big forestry companies getting a free ride - we're being taken for a ride," said Green Party leader David Coon.

The Alward government signed a contract with J.D. Irving on February 7, 2014 guaranteeing a 25 % increase in the company's allotment of softwood until at least 2039. In return, J.D. Irving committed to investing $513 million in its operations, subject to market conditions. A Forest Management Agreement is to be signed with the company by next Tuesday, July 1st, detailing how the massive increase in the company's annual cut will be supplied from Crown land.

The consultant's reports, obtained by the Green Party, compares the marginal effective tax rates for various economic sectors of the provincial economy. Marginal effective tax rates reflect the taxes the federal and provincial governments expect to collect as a result of new business investment.  While the retail, wholesale, construction and communications sectors pay an effective tax rate of between 18 and 20 percent on their profits resulting from new investments, the forestry sector has an effective tax rate of -42.2%, and the manufacturing sector, which includes sawmills and paper mills, has an effective tax rate of -33.9%.

"We are subsidizing J.D. Irving's investments in his own business with the tax system, as well as with the destruction of wildlife habitat and the Acadian forest," said Coon. "Not only will the government earn no new corporate tax revenue from Irving's investments, but he can use the resulting tax credits to reduce income tax he currently pays elsewhere in his operations," said Coon.

The 2012 federal budget will have an impact on the effective tax rates paid by the resource and manufacturing sectors. However, by 2016, the consultant's studies project that the forestry sector will have an effective tax rate of -31.1% and the manufacturing sector will have an effective tax rate of - 24.8%, perpetuating the problem pointed out by the consultant's studies.

"There is no free lunch, so someone has to pay for health care, education and transportation," said Coon. "While we give our money away to the big forestry companies by subsidizing their investments, the costs of health care, education and transportation have been increasingly falling on the shoulders of citizens. The Green Party will bring balance back to New Brunswick," said Coon. "We will ensure the big forestry companies pay their fair share."

Source: An Assessment of Royalty Policy in New Brunswick, Prepared for the Government of New Brunswick, December 9, 2011

Source: Implications of Federal 2012 Budget Changes on . . . Oil and Gas Investment in New Brunswick. Prepared for the Government of New Brunswick, April 11, 2012