Red Deer County will give struggling oil and gas companies help making their municipal tax payments.
Council unanimously approved a plan Tuesday that will give energy industry companies more time to pay outstanding taxes. Firms will be given 12 to 18 months to work out a plan to pay their back taxes. Other than the taxes, their accounts must be in good standing.
“I think this is definitely a right way to go,” said Mayor Jim Wood. “This is no free ride. They’re still going to pay the interest.”
To encourage companies to pay off their debts, a 16.9 per cent interest charge will be applied as usual. When companies have paid off their taxes, the interest rate will drop to six per cent retroactively.
The collapse in world oil prices has hit most energy companies hard. In Red Deer County, $6.5 million in unpaid oil and gas company taxes are on the books, including $1.85 million that will be written off this year.
Many of Alberta’s rural municipalities have been struggling to collect taxes from oilpatch players. Early this year, the Rural Municipalities of Alberta said the amount of taxes owed by oilpatch companies ballooned to $173 million last year, from $81 million in 2018, based on a survey of its 69 county and municipal district members.
Other Red Deer County councillors also expressed their support for giving oil and gas companies a hand.
“I think it’s a good step to show that we are willing to work with them,” said Coun. Richard Lorenz. “Hopefully, they will buy in and work with us to help us get our taxes back.”
Coun. Christine Moore agreed. “I think it’s a resolution. It’s a way we can all move forward.”
While aimed at the oil and gas sector, the tax payment plan is open to other businesses. They must approach the county and will be dealt with individually.
The provincial government has also introduced tax breaks to help the oil and gas industry.
Municipal Affairs Minister Tracy Allard announced last month that industries will get a “tax holiday” for three years when drilling new wells and building new pipelines. The government will also eliminate the well-drilling equipment tax provincewide for new drills.
As well, there will be lower assessments for less productive oil and gas wells and a continuation of the recently introduced 35 per cent assessment reduction on shallow gas wells for three years.
The tax plan replaced an earlier tax relief proposal that was opposed by many rural municipalities, some of which stood to lose millions of dollars in tax revenue.