ALBERTA

Alberta PST Would Wipe Away Provincial Deficit: Conference Board Of Canada

03/04/2013 07:51 EST | Updated 03/05/2013 12:33 EST
AP

Alberta has thrown itself into a fiscal corner of its own making, states the Conference Board of Canada suggesting the Tory government adopt a provincial sales tax.

Approximately 30 per cent of the province's revenue comes from oil and gas, a volatile sector on which to depend for a third of its revenues, states a report by the board, titled Opportunity Lost? Alberta Is Facing Short- and Long-Term Financial Challenges Despite Its Oil Wealth.

With every jump and drop in energy prices, the provincial budget is forced to follow suit, sporadically reporting surpluses or deficits and doing so with little warning. The best way to stabilize revenue is through a revamped tax strategy, the study states.

At 10 per cent, Alberta's corporate taxe rate is tied with New Brunswick' as the lowest corporate rate in the country but is only slightly lower than the national average and the board doesn't see raising that figure as an attractive proposition for the Alberta Tories.

The other options are raising the flat tax in personal income or the implementation of a sales tax, the report states.

"Raising the flat tax on personal income (assuming that introducing tiered rates of personal income taxation is not on the table) means that any additional personal income tax burden would fall disproportionately on low- and middle-income earners—a politically unpopular option," it states.

"Consequently, that leaves the sales tax option."

Authors of the report argue that a two per cent harmonized sales tax would generate $2.4-billion of extra revenue for the province, while a five per cent harmonized PST would rake in five to six billion dollars.

"A 5 per cent sales tax would more than wipe out the current deficit, leave Alberta in a competitive position relative to the other provinces (only Saskatchewan has such a low sales tax), and provide some much needed stability to government revenues," the study states.

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Reaction To Alberta Budget Deficit Forecast

With the provincial budget set to roll out this Thursday, the report also claims the province has doomed future generations to the same problems by not continuing with the intent of the Heritage Fund, which was set up by former Premier Peter Lougheed to secure Alberta's future by contributing 30 per cent of energy revenues to the fund each year.

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"Oil and gas have helped bring prosperity to Alberta but are also a source of many of its fiscal problems," states the report.

The Edmonton Journal brought the two problems together - oil and gas, and taxation - in a story in which an oilsands region bureaucrat said the industry's fly-in work camps are costing Alberta governments hundreds of millions of dollars in lost revenue.

Municipality of Wood Buffalo director of government relations Mike Evans told the Journal energy players deduct the cost of running those camps as business expenses before paying royalties, while the camps themselves keep a large tax base out of the area.

“There’s a loss of income tax and royalties under the work camp system. If even half of the 40,000 people in the camps come from out of province, that’s a lot of taxes being paid elsewhere,” he told the Journal.

All this is made worse, argues the Conference Board of Canada, by the fact that Canadian crude sells for a much lower price than the international benchmarks and by the fact the province's pipeline infrastructure is insufficient and can't get oil to premium markets, and secure future supply and demand for Alberta's economic blood.