Advertisement
Economy

Sales tax needed to help balance Alberta’s budget: report

As Alberta is in the midst of a financial crunch, a new report from the School of Public Policy argues a provincial sales tax could help balance the budget. Adam MacVicar reports.

With Alberta in a cash crunch, is it time to think about implementing a provincial sales tax?

According to a new report from the University of Calgary’s School of Public Policy, Alberta should implement a PST and revenue-neutral carbon levy to help get the province off the roller coaster ride of oil and gas revenues.

“I think the sales tax is a really important part of the tax mix in Alberta that we’ve really been able to postpone up to this point,” University of Calgary economics professor and author of the report, Ken McKenzie, said.

“But I think it’s time we had the discussion and that we move forward.”

Tweet This

The report, titled Altering the Tax Min in Alberta, analyzed a five per cent sales tax, which could generate $5 billion in revenue for the province, McKenzie said.

Story continues below advertisement

According to McKenzie’s report, a five per cent sales tax would be among the lowest in Canada.

The report argues the revenues generated through a sales tax could help lower personal income tax cuts for middle income earners, and help with general revenues for the province.

“It’s a little bit of giving with one hand and taking away from the other, there’s no question about that, but this is a much less costly way of collecting tax revenue than it is personal income taxes or corporate income taxes,” McKenzie said.

READ MORE: MacKinnon Panel report urges Alberta post-secondary schools to rely less on government funding

Although the report considers the Kenney government’s plan to reduce the corporate tax rate a step towards attracting more investment to Alberta, McKenzie said a PST and a revenue-neural carbon levy would also help make up for the revenue lost by the cut.

The UCP government scrapped Alberta’s carbon tax earlier this summer, and the federal government’s carbon tax is set to take effect in Alberta on Jan. 1, 2020.

“Corporate income taxes are very costly in terms of their impact on investment, economic growth, on wages as well, because as firms don’t invest as much, they don’t hire as many workers, some of the burden of that tax is passed on to workers,” McKenzie said. “Lowering the corporate tax is something I do agree with and I’m supportive of, but it will generate a revenue loss… some of that will come back if growth is a little bit higher, but not all of it.”

Story continues below advertisement

READ MORE: Albertans will pay either provincial or federal carbon tax. Which will hurt less?

McKenzie’s report comes days after Alberta’s Blue Ribbon Panel, chaired by former Saskatchewan NDP finance minister Janice MacKinnon, released its own report on Alberta’s finances.

The MacKinnon report recommends the government cut spending across the board, while looking at alternative ways to effectively provide services.

However, the report identified that the Alberta government is overspending, and said implementing or raising taxes isn’t the solution.

“There is no evidence here to support the idea that Alberta is a province that should be raising taxes, not a shred of evidence,” MacKinnon said on Tuesday.

Tweet This

“The evidence all goes the other way; Alberta should be getting its spending in line.”

Finance Minister Travis Toews said his government won’t move forward on all the recommendations provided in the MacKinnon report, but said each recommendation will be evaluated.

Toews said the government would take the MacKinnon report into account while preparing the upcoming provincial budget, and that it would be necessary to cut more than $600 million in spending over the next four years.

Story continues below advertisement

“We spend $10 billion more per capita compared to comparable provinces in this country,” Toews said.

“We don’t have a revenue problem, folks, we have a spending problem.”

Tweet This

McKenzie noted that while the government is taking a look at spending, it should seriously consider a change to taxation in the province.

“I think we need to transform or change our tax system to one that is more flexible in terms of how it deals with the inevitable fluctuation in oil and gas prices and international commodity markets,” McKenzie said. “As we enter an Alberta that looks very different than the Alberta of the past, we need a tax system that has a more appropriate mix of instruments; a sales tax is a part of that, lower corporate taxes are a part of that as well, and perhaps lower personal taxes.”

READ MORE: Alberta finance minister hopes to balance budget by 2023 but nothing confirmed

But Mount Royal political scientist Duane Bratt doesn’t foresee a sales tax being implemented in Alberta anytime soon.

“It’s called the political suicide tax, whoever introduces it would be kicked out of office,” Bratt said.

Tweet This
Story continues below advertisement

“Ideologically it’s just unfathomable to consider a Kenney government bringing in a provincial sales tax.”

The sentiment of the unpopularity of a provincial sales tax is also felt among the opposition NDP.

“We do not support a sales tax,” NDP finance critic Shannon Phillips said. “Our government was on path to balancing the budget without one and the current fiscal mess is entirely the UCP’s fault. Their corporate tax cut has blown a $4.5-billion hole in the budget and created no jobs in return.”

The UCP government has vowed to balance the budget by 2022-2023, and eliminate the province’s debt in the next 20 years.

The government’s first provincial budget is set to be released in the fall.

“These are decisions the government needs to make,” McKenzie said. “The sales tax should be part of the discussion in terms of putting us on a sustainable path,”

Global News Redesign Global News Redesign
A fresh new look for Global News is here, tell us what you think
Take a Survey

Sponsored Stories