Alberta Advantage Tax Guarantee Act

 

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Principles

  • A competitive tax and regulatory regime is the best way to attract investment, create jobs and generate tax revenue.
  • Money is almost always more productively spent in the hands of individuals, families and businesses than in the hands of government.

 

Objectives

  • To unshackle Alberta’s economy and make it the most competitive in Canada in order to attract investment, jobs and tax revenue.
  • To leave more money in the hands of Alberta taxpayers and businesses to spend and reinvest as they see fit.

 

Policy

  • Pass an ‘Alberta Advantage Tax Guarantee Act’ that would require by law that Alberta have the lowest personal, corporate, small business, and carbon taxes in Canada. Under the AATG, businesses or individuals located in Alberta that can prove to the Canada Revenue Agency that that they would pay lower basic tax rates in another Canadian jurisdiction would be reimbursed by the Alberta Treasury for the difference.
    • The AATG would come into force after the budget is balanced.

 

  • Immediately reduce the corporate tax rate from 12% to 11% in conjunction with passing the AATG to send a clear signal to investors that Alberta is open for business again.
    • Reduce the corporate tax rate from 11% to 10% upon balancing the budget and the coming into force of the AATG.

 

  • Eliminate the Alberta Small Business Tax upon balancing the budget and the coming into force of the AATG.
  • Restore the single rate flat tax upon balancing the budget and the coming into force of the AATG.
  • Immediately eliminate the Carbon Tax and end all spending programs funded by it.  

 

Background

  • Alberta Advantage Tax Guarantee Act: Passing the AATG would send an unmistakably clear signal to investors and job creators that Alberta is open for business again, even before the Act comes into force.
    • While increased economic growth would help to generate new revenues, the AATG would not come into effect until the budget is balanced.

 

  • Corporate Income Tax (CIT): The net revenue impact of lower CIT rates and a stronger business environment are expected to largely cancel one another out.
    • According to Budget 2017, reducing the CIT rate from 12% to 11% would result in a $297.3 million tax cut for Alberta businesses.
    • By contrast, Alberta collected $5.8 billion in CIT at the 10% rate in 2014-15, but just $3.9 billion in 2017-18 at the 12% rate.
    • How much of this $1.9 billion revenue reduction is attributed to the 3.6% and 2.8% GDP reduction in 2015 and 2016 respectively, versus the negative impact of higher rates on business growth and relocation, is not easily determined.  

 

  • Small Business Tax (SBT):
    • Manitoba has no SBT; therefore, upon coming into force the AATG would require the elimination of the Alberta SBT.
    • According to Budget 2017, eliminating the SBT would result in a $350 million tax reduction for Alberta’s small businesses.
    • Measures will be required to ensure that eliminating the SBT does not become a negative incentive for business growth.

 

  • Personal Income Tax (PIT): Lower PIT rates will largely be made up for by attracting new tax filers to Alberta.
    • According to Budget 2017, returning to a single-rate flat income tax would result in a $875 million tax cut for Albertans. 
    • Despite significant PIT increases from the last two governments, Alberta is projected to collect only $200 million more in revenues from the PIT in 2017 than it did in 2014-15.
    • A return to a single-rate, flat PIT would be a strong incentive for tax filers in other jurisdictions to pay their taxes in Alberta, mitigating the impact to the Treasury of lower rates.

 

  • Carbon Tax: Repealing the Carbon Tax will be revenue neutral if all spending programs funded by it are also eliminated.

 

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