2011 Alberta Budget Report
February 24, 2011
Highlights
- Deficit of $4.8 Billion for 2010-11 Fiscal Year
- Deficit of $3.4 Billion for 2011-12 Fiscal Year
- Balanced Budget Now Projected for 2013-14 Fiscal Year
- No New Taxes or Tax Increases
Overview
"Building a Better Alberta"
On February 24, 2011, the Honourable Lloyd Snelgrove, Minister of Finance and Enterprise and President of Treasury Board, presented his first budget. The economic picture in Alberta continues to improve, but the deficit is proving to be stubborn to eliminate.
The projected deficit for the 2010-11 fiscal year, originally budgeted to be $4.7 billion, is now forecast to be slightly higher at $4.8 billion. The deficit will decline to $3.4 billion for the 2011-12 fiscal year and to $681 million for the 2012-13 fiscal year. This means that Albertans will have to wait an extra year for a balanced budget, now predicted for the 2013-14 fiscal year. Based on last year's budget, the province's books were expected to be back in the black a year sooner. In his speech, the Minister stated that the recession hit Alberta harder than first thought and due to this, revenues for this year and next year will be lower than predicted in last year's budget. However, there was good news for Albertans as the books will be balanced without a tax increase.
The Alberta economy is strengthening. The economy is expected to grow at an average rate of 3.2% between 2012 and 2014. Business investment outside the oil sector is expected to strengthen this year. The employment outlook is also expected to improve in 2011 with the addition of over 40,000 jobs, and with growth through 2014, the unemployment rate is expected to fall to 4.5%.
In terms of spending, the budget focused on five key areas: improving health care, enhancing skills and innovation, promoting strong and vibrant communities, addressing infrastructure needs and ensuring Alberta's energy resources are developed in an environmentally sustainable way.
The following is a summary of the more important items of interest to our clients.
ALBERTA BUDGET PROJECTIONS
|
(in millions $)
|
Original
Estimate
2010/2011
|
Revised
Forecast
2010/2011
|
Projected
2011/2012
|
|
Revenue
|
$33,964
|
33,982
|
35,589
|
|
Program Expenses
|
(38,376)
|
(38,337)
|
(38,406)
|
|
Debt Servicing Costs
|
(336)
|
(466)
|
(588)
|
|
|
(4,748)
|
(4,821)
|
(3,405)
|
|
Transfers (net) from Sustainability Fund
|
4,748
|
4,821
|
3,405
|
|
Adjusted Deficit
|
-
|
-
|
-
|
PERSONAL TAX MEASURES
Personal Tax Credits
It was confirmed today that personal tax credits for 2011 will be indexed by only 0.9% due to low inflation in 2010. The maximum tax credit amounts and actual Alberta tax credits for 2010 and 2011 are set out below.
|
Alberta Non-Refundable Tax Credit Block
|
|
|
2010
|
2011
|
|
Maximum
Amount
|
Alberta
Tax
Credit
|
Maximum
Amount
|
Alberta
Tax
Credit
|
|
Basic personal amount
|
16,825
|
1,683
|
16,977
|
1,698
|
|
Spousal amount
|
16,825
|
1,683
|
16,977
|
1,698
|
|
Eligible dependant amount
|
16,825
|
1,683
|
16,977
|
1,698
|
|
Age amount
|
4,689
|
469
|
4,731
|
473
|
|
Infirm dependant amount
|
9,740
|
974
|
9,827
|
983
|
|
CPP contributions
|
2,163
|
216
|
2,218
|
222
|
|
EI premiums
|
747
|
75
|
787
|
79
|
|
Pension income amount
|
1,296
|
130
|
1,307
|
131
|
|
Disability amount
|
12,979
|
1,298
|
13,095
|
1,310
|
|
Disability supplement
|
9,740
|
974
|
9,827
|
983
|
|
Tuition and education amounts
|
Variable
|
Variable
|
Variable
|
Variable
|
|
Adoption expenses
|
11,507
|
1,151
|
11,611
|
1,161
|
|
Medical expenses
|
Variable
|
Variable
|
Variable
|
Variable
|
|
Medical expenses (other dependants)
|
11,507
|
1,151
|
11,611
|
1,161
|
|
Caregiver amount
|
9,739
|
974
|
9,827
|
983
|
|
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%.
|
BUSINESS TAX MEASURES
Taxation of Corporate groups
On November 23, 2010, the Federal Department of Finance released a tax policy paper to solicit input from taxpayers and other stakeholders regarding the possibility of changing Canada's corporate tax system to allow some form of tax loss sharing amongst companies in a corporate group.
The stated policy objective is to increase the efficiency of the tax system - over time the view has developed that the lack of a formal system to consolidate tax reporting or to offset profits and losses within corporate groups is considered an impediment to Canada's international competitiveness. In fact, more than two-thirds of countries that belong to the Organization for Economic Co-operation and Development (OECD) allow some sort of formal group taxation system, including the US, UK, France, Australia, Germany, and the Netherlands.
Finance Canada is reviewing the many different approaches to corporate tax loss consolidation taken in other countries, and reviewing the responses from interested Canadians to determine how best to develop a new system of group taxation in Canada. If there is sufficient support for a change in the Canadian tax loss transfer system for Canadian corporations, there will be further consultations with taxpayers and other stakeholders before finalizing the new proposals.
One large issue that will have to be dealt with is the impact of a loss transfer system on provincial corporate tax revenue. The government of Alberta states in the 2011 budget documents that it is generally supportive of changes that will improve the efficiency of the tax system and enhance Canada's international competitiveness. However, it is also the view of the Alberta government that any change to the taxation of corporate groups needs to produce a fair distribution of corporate income tax revenue amongst the provinces.
OTHER CHANGES
Fuel Taxes
Effective midnight on February 24, 2011, the Tax Exempt Fuel Use (TEFU) rebate for licensed vehicles, including the Prescribed Rebate Off-road Percentages (PROP), will be eliminated. The marked fuel (tax excluded) component of TEFU, the Alberta Farm Fuel Benefit and the Alberta Farm Fuel Distribution Allowance are not affected by this change. The elimination of the TEFU rebate, including PROP, will focus the TEFU program on unlicensed vehicles, machinery and equipment and will in turn provide more equitable treatment to taxpayers, reduce abuse and reduce costs for the government. The TEFU program will still provide tax-free marked fuel to eligible users. The elimination of the two rebate programs is expected to reduce the cost of the TEFU program by $65 million in 2011-12.
Education Property Taxes
In 2011-12, education property tax mill rates will fall by almost 8%, marking the 18th consecutive year that rates have either been frozen or reduced. The residential/farm property rate will fall from $2.93 to $2.70 per $1,000 of equalized assessment. The non-residential rate will fall from $4.31 to $3.97 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 24, 2011.
|
|
Top 2011
Personal Rates
%
|
2011
Corporate Rates
|
|
|
|
General
%
|
M&P
%
|
Small
Business
%
|
Provincial
Retail
Sales
Tax
%
|
|
BC
|
43.70
|
26.50
|
26.50
|
13.50
|
7.00(5)
|
|
Alta.
|
39.00
|
26.50
|
26.50
|
14.00
|
-
|
|
Sask.
|
44.00
|
28.50
|
26.50
|
15.50
|
5.00
|
|
Man.
|
46.40
|
28.50
|
28.50
|
11.00
|
7.00
|
|
Ont.
|
46.41
|
28.50(1)
|
26.50
|
15.50
|
8.00(5)
|
|
Qué.
|
48.22
|
28.40
|
28.40
|
19.00
|
8.50(6)
|
|
NB
|
41.70
|
27.50(2)
|
27.50(2)
|
16.00
|
8.00(5)
|
|
NS
|
50.00
|
32.50
|
32.50
|
15.50
|
10.00(5)
|
|
PEI
|
47.37
|
32.50
|
32.50
|
12.00
|
10.00(6)
|
|
Nfld.
|
42.30
|
30.50
|
21.50
|
15.00(3)
|
8.00(5)
|
|
Yukon
|
42.40
|
31.50
|
19.00
|
15.00(4)
|
-
|
|
NWT
|
43.05
|
28.00
|
28.00
|
15.00
|
-
|
|
Nunavut
|
40.50
|
28.50
|
28.50
|
15.00
|
-
|
- The general business rate will be reduced to 28% on July 1, 2011.
- The combined general business and M&P rates will be reduced to 26.5% on July 1, 2011.
- The small business rate decreased from 16% effective for fiscal periods beginning on or after April 1, 2010.
- The tax rate for M&P profits eligible for the small business deduction is 13.5%.
- As part of the HST (combined rates are 15% in Nova Scotia, 13% in Ontario, New Brunswick and Newfoundland & Labrador, and 12% in British Columbia).
- Provincial sales tax applies on GST. Effective combined rate is 13.925% in Québec and 15.5% in Prince Edward Island.
The information in this publication is current as of February 24, 2011.
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.
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