2010 Alberta Budget Report
February 9, 2010
Highlights
- Deficit of $3.6 Billion for 2009-10 Fiscal Year
- Deficit of $4.7 Billion for 2010-11 Fiscal Year
- Balanced Budget Still Projected for 2012-13 Fiscal Year
- No New Taxes or Tax Increases
- New Ownership Rules for Professional Corporations Become Operative on March 1st
Overview
“Striking the Right Balance"
On February 9, 2010, the Honourable Ted Morton presented his first budget as Alberta Minister of Finance and Enterprise. With signs that the economy is strengthening, the Minister was able to present some good news on the elimination of the provincial deficit.
The deficit for the 2009-10 fiscal year will be lower than was originally expected. Part of the deficit reduction is due to a $1.3 billion reduction of government costs arising from program changes and efficiencies (including the elimination of 700 government positions).
The projected deficit for the 2009-10 fiscal year, originally budgeted to be $4.7 billion,
is now forecast to be $3.6 billion. Last year's budget also projected a need for an annual "fiscal correction" of $2 billion per year, beginning for the 2010-11 fiscal year. That reference was not in today's projections. For the 2010-11 fiscal year, a deficit of $4.7 billion is projected (up slightly from the $4.4 billion in last year's budget not including the $2 billion fiscal correction).
The Minister pointed out that revenue growth and expense reductions have allowed for reinvestments in health and other priorities, without jeopardizing the goal of a budget surplus in 2012-13. These budget projections assume that the Alberta economy will grow by 2.6% in 2010 and there will be an average employment increase of 15,000 jobs. It is also assumed that oil prices will increase by 12.6% in 2010-11, to an average of US$78.75 per barrel (bbl), and then increase to US$83.50/bbl in 2011-12.
There were no new taxes and no tax increases announced in today's budget. As we discuss later in the Report, the government announced last week that the new ownership rules for professional corporations will be operative beginning on March 1, 2010. This will be welcome news to professionals who have incorporated and those considering it.
The following is a summary of the more important items of interest to our clients.
ALBERTA BUDGET PROJECTIONS
| |
|
(in millions $)
|
Original
Estimate
2009/2010
|
Revised
Forecast
2009/2010
|
Projected
2010/2011
|
|
Revenue
|
$31,667
|
$33,541
|
$33,964
|
|
Program Expenses
|
(36,176)
|
(36,942)
|
(38,376)
|
|
Debt Servicing Costs
|
(205)
|
(223)
|
(336)
|
|
|
(4,714)
|
(3,624)
|
(4,748)
|
|
Transfers (net) to Sustainability
Fund
|
4,714
|
3,624
|
4,748
|
|
Adjusted Deficit
|
-
|
-
|
-
|
PERSONAL TAX MEASURES
Personal Tax Credits
It was confirmed today that personal tax credits for 2010 will be indexed by only 0.3% due to low inflation during 2009. The maximum tax credit amounts and actual Alberta tax credits for 2009 and 2010 are set out below.
|
Alberta
Non-Refundable Tax Credit Block
|
|
|
2009
|
2010
|
|
Maximum
Amount
|
Alberta
Tax
Credit
|
Maximum
Amount
|
Alberta
Tax
Credit
|
|
Basic
personal amount
|
16,775
|
1,678
|
16,825
|
1,683
|
|
Spousal
amount
|
16,775
|
1,678
|
16,825
|
1,683
|
|
Eligible
dependant amount
|
16,775
|
1,678
|
16,825
|
1,683
|
|
Age amount
|
4,675
|
468
|
4,689
|
469
|
|
Infirm
dependant amount
|
9,710
|
971
|
9,740
|
974
|
|
CPP
contributions
|
2,119
|
212
|
2,163
|
216
|
|
Employment
Insurance premiums
|
732
|
73
|
747
|
75
|
|
Pension
income amount
|
1,292
|
129
|
1,296
|
130
|
|
Disability
amount
|
12,940
|
1,294
|
12,979
|
1,298
|
|
Disability
supplement
|
9,710
|
971
|
9,740
|
974
|
|
Tuition
and education amounts
|
Variable
|
Variable
|
Variable
|
Variable
|
|
Adoption
expenses
|
11,473
|
1,147
|
11,507
|
1,151
|
|
Medical
expenses
|
Variable
|
Variable
|
Variable
|
Variable
|
|
Medical
expenses (other dependants)
|
11,473
|
1,147
|
11,507
|
1,151
|
|
Caregiver
amount
|
9,711
|
971
|
9,739
|
974
|
|
Interest
on student loans
|
Variable
|
Variable
|
Variable
|
Variable
|
|
Donations and
gifts
|
|
|
|
|
|
- first
$200
|
200
|
20
|
200
|
20
|
|
- over
$200
|
75% of income
|
Variable
|
75% of income
|
Variable
|
|
In general, credit amounts
are multiplied by 10% to arrive at the deduction from
Alberta tax. In the
case of donations and gifts over $200, the credit rate is
21%.
|
Alberta Family Employment Tax Credit
The Alberta Family Employment Tax Credit program is available to help low and middle income working families provide for their children. Beginning in July 2010, program recipients will receive increased benefits as the credit is indexed to inflation. Payments will increase to $696 for one child, $1,329 for two children, $1,709 for three children and $1,836 for four or more children. As well, the credit will start to phase out at an increased income level of $33,974.
BUSINESS TAX MEASURES
Professional Corporation Ownership Rules Enhanced
Last fall, the Professional Corporations Statutes Amendment Act, 2009 (Bill 53) received Royal Assent. On February 3, 2010, the Bill was proclaimed in force with an effective date of
March 1, 2010. With this change, Alberta professionals will now have more flexibility when it comes to using professional corporations (PCs). PCs are more restrictive than ordinary corporations as specific rules apply, such as restrictions on who can hold shares and the professional's personal liability related to carrying on the professional business. Currently, professionals subject to PC rules for their corporations include physicians, dentists, chiropractors, optometrists, lawyers, chartered accountants, certified general accountants and certified management accountants. Other professionals can generally use an ordinary corporation.
Beginning on March 1, 2010, a PC's shareholders can include:
- the professional,
- the professional's spouse, including a common-law partner,
- a child of the professional, and
- a trust for a minor child, provided that the shares are transferred to the child within 90 days after the child turns 18.
For more information see our Tax Alert "
Incorporation Will Become More Beneficial for Alberta Professionals" on
www.bdo.ca. If you have any questions on incorporation, contact your BDO Advisor.
Corporate Tax Avoidance Update
In the 2007 budget, the government noted its intention to take steps to fight several tax avoidance schemes. The Minister provided an update today that the government has taken measures to protect the provincial tax base and continues to work with other provincial and federal governments to identify and pursue abusive tax avoidance. As well, the Minister indicated that the government has increased its resources to identify, audit and litigate these transactions.
OTHER CHANAGES
Education Property Taxes
In 2010-11, education property tax mill rates will fall by about 13.5%, marking the 17th consecutive year that rates have either been frozen or reduced. The residential/farm property rate will fall from $3.39 to $2.93 per $1,000 of equalized assessment. The non-residential rate will fall from $4.98 to $4.31 per $1,000 of equalized assessment.
HOW ALBERTA COMPARES
The following chart compares top personal and corporate tax rates and sales taxes for all provinces and territories, as announced to February 9, 2010.
|
|
Top 2010
Personal Rates
%
|
2010
Corporate Rates
|
|
|
|
General
%
|
M&P
%
|
Small
Business
%
|
Provincial Retail
Sales
Tax
%
|
|
BC
|
43.70
|
28.50
|
28.50
|
13.50
|
7.00(6)
|
|
Alta.
|
39.00
|
28.00
|
28.00
|
14.00
|
-
|
|
Sask.
|
44.00
|
30.00
|
28.00
|
15.50
|
5.00
|
|
Man.
|
46.40
|
30.00
|
30.00
|
12.00(1)
|
7.00
|
|
Ont.
|
46.41
|
32.00(2)
|
30.00(2)
|
16.50(2)
|
8.00(6)
|
|
Qué.
|
48.22
|
29.90
|
29.90
|
19.00
|
7.50(7)
|
|
NB
|
43.30
|
30.00(3)
|
30.00(3)
|
16.00
|
8.00(8)
|
|
NS
|
48.25
|
34.00
|
34.00
|
16.00
|
8.00(8)
|
|
PEI
|
47.37
|
34.00
|
34.00
|
13.10(4)
|
10.00(7)
|
|
Nfld.
|
44.50
|
32.00
|
23.00
|
16.00
|
8.00(8)
|
|
Yukon
|
42.40
|
33.00
|
20.50
|
15.00(5)
|
-
|
|
NWT
|
43.05
|
29.50
|
29.50
|
15.00
|
-
|
|
Nunavut
|
40.50
|
30.00
|
30.00
|
15.00
|
-
|
- The combined small business rate will be reduced to 11.0% on December 1, 2010.
- The Ontario corporate rates will be reduced on July 1, 2010. The general business rate will be 30%, the M&P rate will be 28% and the small business rate will be 15.5%.
- The combined general business and M&P rates will be reduced to 29.0% on July 1, 2010.
- The combined small business rate will be reduced to 12.0% on April 1, 2010.
- The tax rate for M&P profits eligible for the small business deduction is 13.5%.
- The provincial sales tax will be harmonized with the GST on July 1, 2010 (combined rates will be 13% in Ontario and 12% in BC).
- Provincial sales tax applies on GST. Effective combined rate is 12.875% in Québec and 15.5% in PEI.
- As part of the HST (combined rate is 13% with GST).
The information in this publication is current as of February 9, 2010.
This publication has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The publication cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact BDO Canada LLP to discuss these matters in the context of your particular circumstances. BDO Canada LLP, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it.
BDO Canada LLP, a Canadian limited liability partnership, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms.
