A Green MP is calling on the federal government to impose a windfall profits tax on fossil fuel companies, citing increasing unaffordability and the ongoing climate crisis.
No, if they aren’t competing then the government should take stronger action than taxing them. We have more tools than this.
The Nash equilibrium for high entry industries (especially in a country like Canada where investors loathe anything new or risky) is to always charge what your competitors do, never lower.
You can charge them more taxes to which they’ll just adjust their prices to compensate for reduced shareholder returns (while blaming the tax for their prices). They’ll also find ways to hide earnings or wash them to reduce their tax burden.
The only solution is to break the equilibrium. Introduce a new player (by nationalizing one of them, even if only temporarily) which actually operates based on a fixed profit ratio instead. Or implement an emergency control which limits shareholder returns beyond some threshold.
The Conservatives will complain about the free market but an efficient market for strategic resources is more important than a free oligarchy. This should be Trudeau’s “just watch me” moment.
No, if they aren’t competing then the government should take stronger action than taxing them. We have more tools than this.
The Nash equilibrium for high entry industries (especially in a country like Canada where investors loathe anything new or risky) is to always charge what your competitors do, never lower.
You can charge them more taxes to which they’ll just adjust their prices to compensate for reduced shareholder returns (while blaming the tax for their prices). They’ll also find ways to hide earnings or wash them to reduce their tax burden.
The only solution is to break the equilibrium. Introduce a new player (by nationalizing one of them, even if only temporarily) which actually operates based on a fixed profit ratio instead. Or implement an emergency control which limits shareholder returns beyond some threshold.
The Conservatives will complain about the free market but an efficient market for strategic resources is more important than a free oligarchy. This should be Trudeau’s “just watch me” moment.