NCPA - National Center for Policy Analysis


November 10, 2005

Alberta's present windfall from oil will likely return Canada to the same battleground of the 1980s where the economy shrunk because citizens bent their efforts to dividing the nation's wealth instead of increasing it, says Filip Palda of the Fraser Institute.

Alberta has two choices, says Palda:

  • It could close all oil wells in Alberta until oil prices come down, since without oil, Canadians have one less reason to grab at each other's wealth.
  • Or, the government could simply convert its stream of revenues from oil into securities, and distribute these securities to Albertans through the types of voucher privatizations that former Soviet Bloc countries performed in the early 1990s.

Under the recommended voucher system, says Palda:

  • Privatized oil revenue directly accruing to Albertans would come under Ottawa's hand through the federal income tax.
  • Eastern Canada would receive part of Alberta's oil wealth through the federal income tax but would receive this wealth in a manner that discourages conflicts between East and West.
  • These privatized revenues would no longer be the target of envy from other provinces since the tax code is uniform; Ottawa could not tax Albertans earning oil revenues any differently from Ontarians earning dividends from banks.

Furthermore, by decentralizing control over oil, Alberta would put oil revenues into a legal fortress protected by the uniform dictates of Canada's tax code, while also answering some of the grievances of provinces without oil, says Palda.

Source: Filip Palda, "Alberta's Oil Wealth," Fraser Forum, October 2005.


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