Canada province Saskatchewan hikes sales tax, sees smaller deficit

By Rod Nickel

WINNIPEG, Manitoba (Reuters) – The western Canadian province of Saskatchewan forecast on Wednesday a much smaller, C$685 million ($513.5 million) deficit for the next fiscal year, 2017/18, as resource revenues look to rise and it boosts the provincial sales tax.

The projected deficit follows a forecast C$1.3 billion deficit for the current 2016/17 fiscal year, which ends March 31.

Slumping prices for crude oil and potash, due to global oversupply, have hit the province’s treasury hard during the past three years. Resource revenues are forecast to rise 10 percent from last year, but remain at low historic levels.

“Our challenge is clear. We need to move away from our level of reliance on resource revenues,” Finance Minister Kevin Doherty said in a statement.

Premier Brad Wall’s right-leaning Sask Party government plans to spend C$14.8 billion, down 1.2 percent year over year, on revenue of C$14.165 billion, up 3.4 percent, in Canada’s biggest wheat-growing province. The total deficit also factors in other adjustments, such as contingencies.

Doherty predicted a smaller, C$304 million deficit for 2018/19, and a return to surplus the following year.

Saskatchewan will on March 23 bump its provincial sales tax to 6 percent from 5 percent, and charge it on more items, including children’s clothing, construction services and some equipment used in the resource sector.

Saskatchewan, home to potash fertilizer mines owned by Potash Corp of Saskatchewan (POT.TO: Quote), Mosaic Co (MOS.N: Quote) and Agrium Inc (AGU.TO: Quote), forecast an average 2017 price for the crop nutrient of $175.74 per tonne, up slightly from $171.87 last year.

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Shell to sell Canada oilsands assets to Canadian Natural Resources in $7.2 billion deal

Royal Dutch Shell Plc will sell almost all of its production assets in Canada’s oilsands in a US$7.25 billion deal that cuts debt and reduces involvement in one of the most environmentally damaging forms of fossil-fuel extraction.

All of the company’s oilsands interests apart from a 10 per cent stake in the Athabasca mining project will be sold to Canadian Natural Resources Ltd., Shell said Thursday. The Hague-based company will continue as operator of the Scotford upgrader, which converts heavy oil to lighter liquids for easier transport, and the Quest carbon capture and storage project.

The deal puts the Anglo-Dutch producer almost two-thirds of the way through a US$30 billion divestment program to reduce debt, which soared following its biggest-ever acquisition of BG Group Plc last year. The company this week ended an almost two-decade old U.S. refining partnership with Saudi Arabian Oil Co. and earlier this year sold a collection of oil fields in the U.K. North Sea. Canadian Natural said the transaction will make its operations more efficient.

“This announcement is a significant step in re-shaping Shell’s portfolio,” Chief Executive Officer Ben Van Beurden said in a statement. “The proceeds will accelerate free cash flow and reduce gearing and make a meaningful contribution to Shell’s US$30 billion divestment program.”

The sale marks another step toward Van Beurden’s goal of preparing Shell for a world of lower oil prices and tighter restrictions on carbon emissions. Oil sands — reserves of heavy crude found primarily in northern Alberta — lured investors in the past decade as the surge in crude prices above US$100 made the difficult extraction process economic. They’ve since fallen out of favour amid a two-year price slump.

Shell on Thursday also amended its pay policy to better reflect incentives to control emissions. Progress in cutting greenhouse gases from its refineries, chemical plants and burning of natural gas at its fields will determine 10 per cent of executives’ bonuses. This portion of the payout was previously based on a range of environmental measures including controlling oil spills and water use.

Abandoned Projects

Shell took a US$2 billion charge in 2015 as it shelved the Carmon Creek oilsands development and Van Beurden said last month that the company wouldn’t take on any new oilsands projects. Exxon Mobil Corp. slashed reserves in February after removing the US$16 billion Kearl project from its books. A day earlier, ConocoPhillips said that erasing oilsands barrels had reduced its reserves to a 15-year low.

Oilsands deposits are among the costliest petroleum projects because the raw bitumen extracted must be processed and converted to a synthetic crude before being transported to refineries, mainly in the U.S. This process also emits more carbon dioxide than production of conventional crude.

“It takes away some very high-cost production and will help reduce Shell’s operating costs, which were already among the highest in its group,” said Ahmed Ben Salem, a Paris-based analyst at Oddo Securities. “Oil sands was losing money and the sale will help the company focus on projects that have lower break-even prices.”

Production Hit

The sale will result in Shell taking a US$1.3 billion to US$1.5 billion post-tax impairment charge after completion, according to the statement. It will also remove about 85 per cent of the proven 2 billion barrels of oilsands reserves from its books. The company had 13.25 billion barrels of total oil and gas reserves at the end of 2016, according to its annual report.

Shell’s share of output from the Athabasca project before the divestment was about 150,000 barrels a day, with another 14,800 barrels a day from Peace River. Total oil and gas production in 2016 averaged 3.7 million barrels of oil equivalent a day, according to the company’s annual report.

Shell will sell to a unit of Canadian Natural its entire 60 per cent interest in the Athabasca project, all of the Peace River Complex in-situ assets — which extract crude without mining — and a number of undeveloped leases in Alberta. Those disposals will fetch about US$8.5 billion, comprising cash and shares.

Under a second agreement, Shell and Canadian Natural will jointly acquire and own Marathon Oil Canada Corp., which holds a 20 per cent interest in the Athabasca project, from an affiliate of Marathon Oil Corp. for US$1.25 billion each, to be settled in cash.

Canadian Natural says as part of the agreements, it will welcome approximately 3,100 employees from Shell and Marathon Oil. About 2,760 of them work at the mines, 110 are at the Peace River in situ operations and 230 are based in Calgary.

“This transaction is significant for Canadian Natural as it increases the reliability of underlying sustainable cash flows,” President Steve Laut said in a separate statement. “It allows focus on the key operating strengths.”

The company will issue about $4 billion of its shares to Shell in payment for the assets, according to the statement. It also secured about $3 billion of loans and $6 billion of bonds to fund the acquisition. Canada’s second-biggest oil and natural gas producer said this month profit quadrupled in the fourth quarter as production increased.

The transactions are expected to close in mid-2017, subject to regulatory approvals.

With files from Canadian Press

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Canada unveils wait-and-see budget amid U.S. policy uncertainty

By Andrea Hopkins
| OTTAWA, March 22

Canada’s Liberal government
unveiled a stay-the-course budget on Wednesday that targeted
export growth and some measure of tax reform but did little to
whittle away at deficits even as it backed off from an explicit
pledge to improve the debt outlook.

Finance Minister Bill Morneau’s second budget contained few
surprises, in line with expectations that Ottawa wants to wait
to see what impact U.S. President Donald Trump’s still-evolving
policies will have on Canadian competitiveness and trade before
committing to further stimulus or tax reform.

Morneau repeatedly referred to the benefits of free trade,
pushing back on U.S. protectionism just a week after a pledge to
promote free trade was removed from the concluding statement of
the G20 meeting in Germany at the insistence of the United
States, Canada’s largest trading partner.

The budget blueprint, which is bound to be implemented given
the Liberal’s parliamentary majority, reinstated a fiscal
cushion, effectively a rainy day reserve set at C$3 billion a
year to guard against any unexpected event that could hurt the
government books, a move economists praise as prudent.

Bringing back the cushion widened the projected deficit in
2017-2018 to C$28.5 billion from C$27.8 billion forecast in
November, nearly three times the C$10 billion annual deficit
targeted by the Liberals during their 2015 election campaign.

But, combined with modest economic assumptions that look
easy to beat, the cushion should allow the government to trumpet
a better-than-expected performance as it nears the 2019 federal

Still, the move to drop an explicit goal of improving the
debt-to-GDP ratio over the course of the government’s four-year
mandate disappointed economists concerned that Canada is not
prepared to rein in deficits after trying to stimulate tepid
growth with infrastructure spending and tax cuts for families.

“In terms of ‘stay the course’ and ‘do no harm,’ I think the
budget achieved those goals, but I would have preferred they’d
left an explicit target some sort in terms of debt to GDP
declining or ideally a balanced budget,” said Craig Wright,
chief economist at RBC.

The Liberals had previously promoted the ratio, which at
about 31.5 percent of GDP is low compared to many G7 rivals, as
a better measure of the nation’s debt burden than the deficit,
which had been eliminated under the previous Conservative

Morneau, who touted the budget as “ambitious but
responsible,” laid out a plan to grow Canada’s goods and
services exports by 30 percent by 2025, a lofty goal given the
slow pace of export growth since the 2009 recession.

In continuing the Liberal’s pledge to increase taxes on the
wealthiest Canadians to help the middle class, the budget
promised to close a loophole that allowed high-income earners to
use private corporations to reduce income taxes. It also pledged
to tax ride-sharing programs, such as Uber, at the same rate as
taxi corporations.

While the budget did not contain any measures aimed at
cooling Canada’s hot housing market, Morneau promised additional
money to gather housing data, seen as a possible first step to
reining in foreign investment or speculation that observers say
has created a bubble in Toronto, Canada’s largest city.

(Additional reporting by Leah Schnurr and David Ljunggren; and;
Editing by Dan Burns)

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Canada Tax Tweaks to Hit Oil-and-Gas Drillers and Uber Riders

(Bloomberg) — Oil-and-gas drillers, doctors, bus riders and brewers will pay more tax under the 2017 federal budget — though most Canadians will see little change in their personal or corporate taxes.

Justin Trudeau’s Liberal government expects to raise C$4.79 billion ($3.58 billion) over five years by revamping parts of Canada’s tax system, with the biggest measures coming from cracking down on tax evasion and eliminating “inefficient” tax policies. Canada expects to spend an additional C$523.9 million over five years to prevent tax evasion and improve tax compliance — a move expected to bring in C$2.5 billion of revenue in that period. “It’s a demonstration that the government is taking that area very seriously and that they’re expecting to have returns from that,” said Albert Baker, global tax policy leader for Deloitte.

Absent from Trudeau’s budget released Wednesday were broad changes to personal or corporate taxes or the capital gains tax — an area that had sparked concerns among entrepreneurs and investors ahead of the budget. But other measures — closing loopholes, eliminating tax advantages for private companies, and cutting tax credits — will have some effect on professionals, business owners and companies.

The budget proposes to cut a tax credit for public transit passes by July, raising C$1.01 billion over five years — the single biggest measure among the tax changes proposed. Makers of beer, wine and spirits will also face a 2 percent increase in excise duty rates, bringing in C$470 million over five years. Changes to tobacco taxation — which includes eliminating a tobacco manufacturers surtax and increasing excise duty rates — will bring another C$225 million.

Professionals including accountants, dentists, lawyers, doctors, veterinarians and chiropractors will no longer be allowed to use billed-basis accounting — a way to defer taxes — under the fiscal plan, resulting in C$425 million in additional revenue in the first three years. Oil-and-gas companies will see expenses for drilling successful wells reclassified for a different tax treatment, adding C$145 million in three years.

The government also proposes new rules governing when derivatives investors can recognize gains and losses on their investments, netting C$304 million over five years.

Uber riders will be paying more under the proposed plan, with the budget calling for ride-sharing services to charge sales tax on their fares, bringing them in line with the taxi industry. That move will bring in C$20 million over five years.

Other changes may be down the road. The government pledged to release a paper “in the coming months” targeting tax planning strategies used by private corporations, arguing that such moves can result in high-income individuals gaining unfair tax advantages. These strategies include converting a company’s regular income into capital gains or holding a passive investment portfolio inside a private corporation.”

“Our review of federal tax expenditures highlighted a number of issues around tax planning strategies using private corporations,” Morneau said in the text of his speech to Parliament. “Strategies that can result in some very wealthy individuals getting unfair tax breaks at the expense of others.”

Canada also plans to amend the Income Tax Act to tighten rules for life insurance companies including Manulife Financial and Sun Life, preventing them from using their foreign operations to reduce income tax when insuring Canadian risks, according to the budget.

©2017 Bloomberg L.P.

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Best friends become first to co-parents in Canada

Natasha Bakht and Lynda Collins are platonic best friends who fought a two-year-long legal battle to be officially recognised as co-parents to Natasha’s disabled son, Elaan.

It’s the first time in Canadian history that two people who have never been in a romantic relationship have been legally recognised as parents.

Video Journalist: Jan Bruck.

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Worried Canada presses U.S. over Buy America steel plan: sources

By David Ljunggren

OTTAWA (Reuters) – Canada’s government, under pressure from domestic steel firms, is expressing concern to U.S. officials about a proposed Buy America policy that could cause heavy Canadian job losses, people familiar with the discussions told Reuters.

U.S. President Donald Trump, who wants firms to “Buy American and hire American,” pledged in January to require new pipelines to use U.S.-made steel.

Canadian steel firms fear Trump’s plan could badly hurt a highly-integrated North American industry, and are pressing Ottawa to take action, the people added.

Canadian Foreign Minister Chrystia Freeland raised the issue with U.S. Commerce Secretary Wilbur Ross in their first conversation on March 9 and underscored worries about potential job losses, said a source familiar with the matter.

A statement issued after the meeting merely said that Freeland had highlighted “the mutual benefits of the integrated Canada-U.S. steel industry” but made no mention of the conversation about job losses.

In Washington, a Commerce Department official said Freeland had raised the Buy American issue during the call and that Ross noted her concerns. The official did not give further details.

Freeland spokesman Alex Lawrence said the minister would “continue to defend our steel workers” but gave no details.

Canadian diplomats and officials fanning out across the United States on a campaign to stress the benefits of the North American Free Trade Agreement (NAFTA) are also underscoring the importance of the steel sector and concerns about what could happen if the Buy American move went ahead, said a senior political source who was not authorized to speak about the matter publicly.

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CANADA STOCKS-TSX edges higher as some miners, banks gain

(Adds details on specific stocks, updates prices)

* TSX up 14.45 points, or 0.09 percent, to 15,456.77

* Six of the TSX’s 10 main groups move higher

TORONTO, March 21 Canada’s main stock index
barely rose on Tuesday as some heavyweight banking stocks and
miners notched gains and Ivanhoe Mines Ltd jumped after
announcing a copper deposit discovery.

The most influential movers on the index included Barrick
Gold Corp, which advanced 1.2 percent to C$25.76.

The world’s largest gold producer said a World Bank
arbitration tribunal had ruled in favor of it and joint venture
partner Antofagasta plc over a copper project in

Ivanhoe Mines jumped 8.6 percent to C$4.67 after it said it
had discovered more copper at its mine in the Democratic
Republic of Congo.

But several base metal miners featured on the negative side
of the ledger as copper prices fell, with First Quantum Minerals
Ltd down 1.6 percent at C$14.19 and Lundin Mining Corp
falling 3.1 percent to C$7.81.

The materials group, which includes precious and base metals
miners and fertilizer companies, added 0.5 percent overall.

At 10:49 a.m. ET (1449 GMT), the Toronto Stock Exchange’s
S&P/TSX composite index was up 14.45 points, or 0.09
percent, to 15,456.77. Six of the index’s 10 main groups were in
positive territory and advancers slightly outnumbered decliners

The heavyweight financials group gained 0.3 percent,
recovering some of its losses from the prior two sessions as
bond yields perked up. The country’s largest lender, Royal Bank
of Canada, advanced 0.7 percent to C$97, while insurer
Manulife Financial Corp fell 0.8 percent to C$23.82.

Consumer staples stocks gained 0.4 percent.

Canadian retail sales rebounded in January with the largest
gain in nearly seven years as spending rose across most sectors,
led by an increase in purchases of cars, Statistics Canada said
on Tuesday.

(Reporting by Alastair Sharp; Editing by Nick Zieminski)

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No cardboard cut-outs of Trudeau, Canada diplomats told

No cardboard cut-outs of Trudeau, Canada diplomats told

  • 21 March 2017

Canadian diplomatic missions in the United States have been told to stop using life-size cardboard cut-outs of Prime Minister Justin Trudeau to promote the country.

The two-dimensional Trudeaus have been spotted at a number of promotional events in the US, most recently at a tourism stand at the South by Southwest (SXSW) festival in Austin, CBC News reports. But while they seem to be popular with visitors who share photos on social media, the government department Global Affairs Canada is less than impressed.

“We are aware of instances where our missions in the United States had decided to purchase and use these cut-outs,” spokesman Michael O’Shaughnessy tells CBC. “The missions have been asked to no longer use these for their events.” CBC says the department did not respond to questions about why the instruction was given.

The decision comes after a freedom of information request by the opposition Conservative Party revealed emails sent between embassy and consular staff. They show that the embassy in Washington DC paid for express delivery of a Trudeau cut-out last summer so that it would arrive in time for Canada Day celebrations, The Canadian Press reports.

The Washington embassy’s interest was apparently piqued by the presence of a cardboard Trudeau at the consulate in Atlanta. Some staff were concerned that the idea was not very prime ministerial, but the embassy’s events production manager said it would be “a hoot” and prove popular on Snapchat. Photos from the day show visitors to the embassy posing for pictures alongside the cut-out.

While some saw it as a bit of fun, the Conservatives didn’t miss the opportunity to take a dig at the real prime minister, MP John Brassard telling CBC: “A life-size, two-dimensional cut-out is probably a perfect metaphor for everything that Justin Trudeau represents.”

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Canada Seeks to Avoid Brexit Cliff-Edge With Trade Deal Talks

(Bloomberg) — Canada wants to avoid a Brexit cliff-edge too.

The government is pushing for its trade deal with Europe to be ratified by Britain before it leaves the European Union to secure the crucial agreement. It also has its eye on deeper relations with the U.K. once Brexit is complete.

Canada wants to preserve any preferential access that businesses or investors currently have, High Commissioner to the U.K. Janice Charette said in an interview from her office overlooking Trafalgar Square on March 20. “That’s the idea of avoiding some kind of a cliff-edge,” she said. Also, “we’ll be interested in seeing what we can do to enhance the bilateral arrangement” after the U.K. is out.

Prime Minister Theresa May will start formal divorce talks with the EU at the end of the month. While Britain can’t officially negotiate new trade accords until it has finished leaving, it has held preliminary discussions with several countries. The prospect of leaving the bloc without alternative arrangements in place is commonly referred to as the “cliff-edge,” which businesses say would be the most destructive outcome.

Canada’s efforts to remove trade barriers with the Comprehensive Economic and Trade Agreement come at a time when protectionist sentiment is increasing globally. U.S. President Donald Trump has been ratcheting up rhetoric against free trade, while Group of 20 finance chiefs removed a line to “resist all forms of protectionism” in their latest communique.

Comparing Notes

When it comes to Trump, “we are their closest neighbor, so people are curious to see if we have any insights to share,” Charette said. “We’re all comparing notes in terms of how best to make sure that the interests of our countries are well understood.”

The CETA agreement could provide some guidance for modernizing the North American Free Trade Agreement, which Trump has pledged to renegotiate, Charette said.

Canada’s deal with Europe is set to boost trade with the EU by about a quarter, according to government estimates. The U.K. is Canada’s biggest partner within the bloc, and Charette sees further opportunities.

“If you look at just one-to-one, the area of financial services is huge for the U.K., and that will be of interest for Canada” for going “beyond what is in the CETA agreement today,” Charette said. Trade in services more broadly could be improved and the countries could discuss how to build on CETA arrangements for intra-company transfers or the movement of professionals, she said.

Trade Talks

Technical discussions to preserve CETA with the U.K. after Brexit have begun. Francois-Philippe Champagne, appointed Canadian trade minister this year, has met with U.K. Trade Secretary Liam Fox several times already, Charette said.

CETA will be enacted provisionally later this year, reducing tariffs on products like maple syrup and fresh Canadian lobster. Other parts of the agreement, like investor-state dispute settlements, will only come into effect with the consent of domestic parliaments. “The sooner that happens the better, because the longer that goes on, the bigger the chance is that you have change in political leadership,” she said.

She also stressed that Canada’s experience negotiating with Britain in the face of Brexit doesn’t mean it will be so easy for everyone.

“There’s a difference between countries now that have a trade agreement with the EU and countries that don’t,” Charette said. “If both countries put a priority on it, and they have the capacity, they can move quickly — but that’s a lot of countries to deal with, and you can’t do them all at the same time.”

–With assistance from Josh Wingrove

©2017 Bloomberg L.P.

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