The government of British Columbia (Canada) has unveiled its plans to tax LNG operations: the tax rate will start at 1.5% of net income (once capital investment is deducted) and will remain stable until LNG plants reach financial balance and recoup their capital investments (1.5% while capital investment is being deducted). The tax rate will increase after four years to 3.5% and will remain stable at this level for another 20 years. The final tax rate will finally rise to 5% in 2037. Moreover, the income tax rate will be cut from the current 11% to 8%. In the former budget (February 2014), the government had proposed a two-tiered LNG tax, at 1.5% for the first three years and rising to 7% after 5 years.
The cut in proposed taxes is aimed at encouraging investors in the LNG sector, in a context of increased construction costs and declining LNG prices eroding financial returns for investors.