Facing a revenue drop of more than $11 billion, and a budget deficit of more than $24 billion, an economist with the University of Calgary says Alberta’s so-called tax advantage is no longer credible.
With no provincial sales tax, and high personal income tax exemptions, Alberta has long charged the lowest tax rates on its citizens in the country, relying heavily on non-renewable resource revenues to fill the gap.
“It’s an advantage only if it’s an advantage you can credibly maintain,” Dr. Ron Kneebone said.
“It’s not credible anymore that they can continue to maintain those low tax rates. So firms are now looking at Alberta and saying, ‘Yeah right.”
This year, bitumen royalties are forecast to total $686 million, down from the projected $3.2 billion in February. In comparison, the province expects to rake in $796 million from tobacco taxes.
Dr. Kneebone has long studied Alberta’s fiscal record, and even co-authored a paper in 2013 charting a road map to reduce the province’s reliance on resource royalties.
“Alberta has a substance abuse problem,” reads the first line of A Recovery Program for Alberta: A 10-Year Plan to End the Addiction to Resource Revenues.
“The substance is fossil fuels, and the province has become hooked on the revenues from oil and gas sales to fund its spending on health, education and social services.”
The paper calls on the province to reign in spending, and raise taxes, either through a sales tax or higher personal income taxes.
Dr. Kneebone says the numbers today would be different, but the general concept remains the same.
“You don’t have to do it tomorrow, you can take ten years to do it.”
Finance Minister Travis Toews has made it clear, tax hikes aren’t in the short term plans for his department.
“In the longer term time frame, it’s important that Albertans have a discussion on revenue structure, tax structure,” Toews said when asked about Alberta’s tax rates on Thursday.
“At a time of great economic challenge for so many Albertans and Alberta businesses, to look at raising costs for those businesses and for Albertans would be irresponsible.”
The UCP government has committed to conducting a review of Alberta’s tax policy later in this mandate.