2016 Alberta Budget Report | FBC, Canada's Farm & Small Business Tax Specialist

2016 Alberta Budget Report

2016 Alberta Budget Report

On April 14, 2016, the Honourable Joe Ceci, President of Treasury Board and Minister of Finance, presented his second budget and the second budget of Alberta’s NDP government.  

In the first budget presented by this government in October 2015, a deficit of $6.1 billion was predicted for the 2015-16 fiscal year.

As expected with the continued fall in oil prices, today’s budget indicates that the financial condition of the province has not improved as the revised deficit forecasted for 2015-16 is now $6.4 billion.

Highlights

  • Deficit for 2015-16 of $6.4 billion
  • Deficit of $10.4 billion predicted for 2016-17
  • Deficit of $10.1 billion predicted for 2017-18
  • Budget to be balanced by 2024
  • Small business tax rate reduced
  • No personal tax increases

In media reports, the Minister predicted that Alberta will not balance the books until 2024.

There is no introduction of a provincial sales tax in Alberta.

Personal Tax Measures

Alberta’s combined federal and provincial top marginal rates for income, capital gains and eligible dividends are as follows:

Personal Combined Federal/Provincial Top Marginal Rates

 

2016

Interest and regular income

48.0%

Capital gains

24.0%

Eligible dividends

31.7%

Non-eligible dividends

40.2%

Non-Eligible Dividend Tax Credit

As a result of the reduction in the small business rate effective January 1, 2017, the dividend tax credit for non-eligible dividends will be reduced to ensure the income earned in a small business and flowed out to the shareholders continues to be taxed at a minimum of 10%.

Alberta Investor Tax Credit

The budget provides $90 million for the new Alberta Investor Tax Credit for investors who invest in eligible small and medium-sized enterprises in Alberta.  

The budget provides no further details on this proposed measure.  [Further detail on this credit will be announced later this year.]

Climate Leadership Adjustment Rebate

The budget introduced a non-taxable, refundable rebate to help offset the carbon tax for individuals who earn less than $47,500 in net family income and for couples and families who earn less than $95,000 in net family income.

The rebate, which will begin in January 2017, generally provides up to $200 for an adult, $100 for a spouse and $30 for each child under 18 in the household (to a maximum of 4).  

The rebates will be increased in 2018 to $300 for an adult, $150 for a spouse and $45 for each child. Payments will not be indexed to inflation.

Alberta Child Benefit

In last year’s budget, the government introduced a new credit, the Alberta Child Benefit to help children in families with lower income. 

Today’s budget confirmed that the program begins in July 2016 and will provide families with an annual benefit of up to $1,000 for one child, and then up to $550 for each of the next 3 additional children.  

Families with net income of up to $25,500 will receive the maximum benefit under this program. 

Benefits will begin to phase out once family net income surpasses $25,500 and will be fully phased-out once family net income reaches $41,220.  

Alberta Family Employment Tax Credit (AFETC)

Last year, the government indicated that the AFETC will be enhanced starting July 2016. Today’s budget confirmed the enhancements. 

The budget increased the rate at which benefits from the Alberta Family Employment Tax Credit are phased in to 11% on working income over $2,760 (from 8%).  

In addition, the budget increases the phase-out threshold to $41,250 (from $36,778).

These changes are effective July 1, 2016.

Alberta Non-Refundable Tax Credits

The government confirmed today that personal tax credits for 2016 will be indexed by 1.3%.

The maximum tax credits amounts and actual Alberta tax credits for 2015 and 2016 are set out below.

Alberta Non-Refundable Tax Credits

 

2015

2016

Maximum Amount

Alberta Tax Credit

Maximum Amount

Alberta Tax Credit

Basic Personal Amount

$18,214

$1,821

$18,451

$1,885

Spousal Amount

18,214

1,821

18,451

1,885

Eligible dependent amount

18,214

1,821

18,451

1,885

Age amount

5,076

508

5,141

514

Infirm dependent amount

10,543

1,054

10,680

1,068

CPP Contributions

2,480

248

2,544

254

EI Contributions

931

93

955

96

Pension income amount

1,402

140

1,421

142

Disability amount

14,050

1,405

14,232

1,423

Disability supplement

10,543

1,054

10,680

1,068

Tuition and education amounts

Variable

Variable

Variable

Variable

Adoption expenses

12,457

1,246

12,619

1,246

Medical expenses

Variable

Variable

Variable

Variable

Medical expenses (other dependents)

Variable

Variable

Variable

Variable

Caregiver amount

10,544

1,054

10,681

1,068

Interest on student loans

Variable

Variable

Variable

Variable

Donations & Gifts
-first $200
- over $200


200
75% of income


20
Variable


200
75% of income


20
Variable

In general, credits are multiplied by 10% to arrive at the deduction from Alberta Tax.  In the case of donations and gifts over $200, the credit is 21%

Corporate Tax Measures

Corporate Tax Rates (Confirmed)

The budget reduced the small business corporate income tax rate to 2% (from 3%) effective January 1, 2017.

As a result, Alberta’s corporate income tax rates will be as follows:

Corporate Tax Rates

 

Alberta

Combined Federal & Alberta

 

2016

2017

2016

2017

General

12%

12%

27%

27%

M&P

12%

12%

27%

27%

Small business*

3%

2%

13.5%

12.5%

*On first $500,000 of active business income

Capital Investment Tax Credit

The budget provided $75 million for the new Capital Investment Tax Credit for corporations that make investments in eligible capital assets.

The credit will apply to the first time acquisition of new and used property in value-added agriculture, manufacturing and processing, tourism infrastructure and culture industries.

The budget provided no further details on this proposed measure.  [Further detail on this credit will be announced later this year.]

Carbon Levy Measures

The budget proposed a carbon fee (referred to as a “carbon price”). 

This is to be implemented through a new carbon levy, as well as through new performance standards for large industrial emitters.  

Alberta intends to introduce legislation enacting the carbon levy this spring, with regulations and further details later this year.

Performance standards for large industrial emitters

The budget proposed that carbon emissions of large industrial emitters will continue to be subject to the Specified Gas Emitters Regulation (SGER) framework until the end of 2017 at which time the province will transition to product and sector-based performance standards.  

Large industrial emitters will be subject to a price of $20 per tonne of greenhouse gas emissions over their emissions target as of January 1, 2016.

This price will rise to $30 per tonne on January 1, 2017.

Facilities covered under the requirements of the SGER standards will be exempt from paying the levy on heating fuels.  

According to the budget, on-site combustion in conventional oil and gas will be levied starting January 1, 2023.

Carbon Levy

The budget also introduced a carbon levy on certain fuels consumed for combustion purposes as of January 1, 2017.

This levy will be included in the price of transportation and heating fuels, such as diesel, gasoline, natural gas and propane, but will not apply directly to consumer purchases of electricity.

Starting January 1, 2017, the carbon levy will be applied to fuels at a rate of $20 per tonne of carbon dioxide-equivalent emissions and will increase to $30 per tonne on January 1, 2018.

According to the budget, and in line with the province’s methane reduction strategy, natural gas produced and consumed on-site by conventional oil and gas producers will be exempt from the carbon levy until January 1, 2023.

The carbon levy will apply to individual fuels based on the amount of emissions released when the fuel is combusted.

The rates on major fuels are as follows:

Type of fuel

January 1, 2017 Rate
($20/tonne)

January 1, 2017 Rate
($30/tonne)

Diesel

5.35 cents per litre

8.03 cents per litre

Gasoline

4.49 cents per litre

6.73 cents per litre

Natural Gas

1.011 $/GJ

1.517 $/GJ

Propane

3.08 cents per litre

4.62 cents per litre

Exemptions to the levy will include:

  • Heating fuels used on sites subject to the Specified Gas Emitters Regulations (SGER)/performance standards regime
  • Natural gas produced and consumed on site by conventional oil and gas producers (until January 1, 2023)
  • Fuel used in industrial processes that is not combusted
  • Purchases of fuel on-reserve by eligible First Nations individuals and bands for personal and band use
  • Marked gasoline and diesel used by farmers in farming operations
  • Biofuels, including biomethane, biodiesel and ethanol
  • Inter-jurisdictional flights
  • Fuel sold for export.

The budget specifies that, for natural gas, the levy will be collected and remitted by entities in the natural gas distribution system.  

For gasoline and other refined fuels, the collection and remittance of the levy will align with the current system for remitting fuel tax.

For other fuels such as natural gas liquids and coal, entities that either produce and sell, or import and sell these fuels will collect and remit the levy.

Other Measures (Not Related To Income Tax)

Education Property Tax

The education property tax revenue for 2016-17 is forecast at $2.4 billion which corresponds to 32% of 2016-17 education operating costs. 

Consistent with comments made in the March 2015 budget, the government will continue to determine this amount annually, providing flexibility with respect to the annual revenue raised so that it continues to be appropriate in the current economy.

The 2016 residential/farmland rate will decrease from $2.50 to $2.48 per $1,000 of equalized assessment, and the non-residential rate will decrease from $3.67 to $3.64 per $1,000 of equalized assessment.

Economic Investment

The budget announced economic investments, including:

  • $25 million for the Alberta Enterprise Corporation
    To be invested in early stage and clean technology focused venture capital
  • $25 million for attracting and supporting new businesses
    To support entrepreneurs and small or medium-sized enterprises commercialization efforts, expand the Agrivalue Processing Business Incubator in Leduc and attract major new business investment or company headquarters
  • $25 million for apprenticeship and training
    To support apprenticeship-focused and occupationally focused training opportunities
  • $10 million for regional economic development initiatives drive
    To drive investment, business growth, job creation and diversification throughout Alberta.

ABC Review (Farm Agencies Dissolved)

In November 2015, the government announced a review of agencies, boards and commissions (ABCs), focused on improving services and ensuring value for Alberta taxpayers.

The first phase of the review, which is nearing completion, included 136 public agencies subject to the Alberta Public Agencies Governance Act.

The second phase, to be concluded by Fall 2016, includes 146 agencies that are not governed under the Act.

The third and final phase, to be concluded by early 2017, will focus on the boards of governors at public post-secondary institutions.

Based on the review to date, 11 agencies will be amalgamated in some fashion, and 15 agencies will be dissolved with the relevant functions brought into government departments. In some cases, stakeholder consultations will be undertaken to assist with the development of implementation plans.

Budget 2016 reflects savings of $33 million over three years related to phase one changes.  

Additional savings from the remaining phases of the review will be reflected in Budget 2017.

Amalgamate:

  • Alberta Innovates Corporations (four agencies into one under Economic Development and Trade)
  • Land Compensation Board, Municipal Government Board, New Home Buyer Protection Board, Surface Rights Board
  • Calgary and South, Central, Edmonton and North Mental Health Review Panels

Dissolve:

  • Agricultural Development Committee
  • Agricultural Operation Practices Act Policy Advisory Group
  • Alberta Environmental Monitoring, Evaluation and Reporting Agency
  • Alberta Farm Safety Advisory Council
  • Alberta Grains Council
  • Alberta Livestock and Meat Agency Ltd.
  • Alberta Next Generation Advisory Council
  • Alberta Recreation Trails Partnership
  • Alberta Strategic Tourism Council
  • Buffalo Lake Management Team
  • Disabled Hunter Review Committee
  • Government House Foundation
  • Seniors Advisory Council for Alberta
  • Utilities Consumer Advocate Advisory Board
  • Wild Rose Foundation

How Alberta Compares

The following chart compares top personal and corporate tax rates and sales taxes for all provinces and territories, as announced to April 14, 2016.

 

 

2016 Corporate Tax Rates

 

 

Top 2016 Personal Rates

General
%

M&P
%

Small Business
%

2016 Prov. Sales Tax

B.C.

47.70

26.00

26.00

13.00

7.00

Alta.

48.00

27.00

27.00

13.50

-

Sask.

48.00

27.00

25.00

12.50

5.00

Man.

50.40

27.00

27.00

10.50

8.00

Ont.

53.53

26.50

25.00

15.00

8.00(5)

Qué.

53.31

26.90

26.90

18.50(3) 

9.975(6)

N.B.

53.30

29.00(1) 

29.00(1)

14.00(1)  

8.00(5)(7)

N.S.

54.00

31.00

31.00

13.50

10.00(5)

P.E.I.

51.37

31.00

31.00

15.00

9.00(5)

N.L.

49.80

30.00(2)  

30.00(2)  

13.50

8.00(5)(7)

Yukon

48.00

30.00

17.50

13.50(4)

-

N.W.T.

47.05

26.50

26.50

14.50

-

Nunavut

44.50

27.00

27.00

14.50

-

  1. Effective April 1, 2016, the general corporate tax rate increased from 27% and the small business tax rate decreased from 14.5%
  2. Effective January 1, 2016, the general corporate tax rate increased from 29% and the M&P rate increased from 20% due to the elimination of the Manufacturing and Processing Profits Tax Credit.
  3. Quebec provides a rate reduction for manufacturing SMEs.  Where certain conditions are met, the maximum reduction available is 4%, for a combined rate of 14.5%.  Note that a lessor reduction may be available to certain manufacturing SMEs where not all conditions are met.
  4. The tax rate for M&P profits eligible for the small business deduction is 12%.
  5. As part of the HST (combined rates are 15% in Nova Scotia and 14% in Prince Edward Island and 13% in Ontario, New Brunswick (see note 7) and Newfoundland & Labrador).
  6. The QST system is harmonized with the GST, though two separate tax systems remain – the GST and the amended QST.
  7. The provincial portion of the HST will increase to 10%, resulting in a combined HST rate of 15%, effective July 1, 2016. 

(Source: Alberta Government)

"Fortune sides with him who dares." — Virgil