Alberta Budget Report 2017

Alberta Budget Report 2017

On March 16, 2017, the Honourable Joe Ceci, President of Treasury Board and Minister of Finance, presented his third budget and the third budget of Alberta’s NDP government.

In the third quarter fiscal update released on February 23rd, the government reported that the economy is turning a corner and showing early signs of recovery, including higher exports, drilling activity and employment.

The budget confirmed that the province is predicting real GDP growth of 2.6% for 2017, which would be the highest rate in Canada, according to the government.

Highlights

  • Deficit for 2016-17 of $10.8 billion
  • Deficit of $10.3 Billion predicted for 2017-18
  • No personal or corporate tax increases
  • Provincial small-business rate for 2017 is 2% (as announced in Budget 2016)
  • Economy predicted to grow by 2.6% in 2017
  • Tobacco and Fuel rates remain unchanged

The deficit for the 2016-17 fiscal year is now predicted to be $10.8 billion, which is up slightly from the $10.4 billion set in last year’s budget.

The province’s debt is expected to rise from $32.6 billion for 2016-17 to $71.1 billion for 2019-20. Although the debt-to-GDP ratio remains the lowest among the provinces, it will grow from 10.6% to 19.5% over the same period.

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

Personal Tax Measures

Personal income tax rates

It was confirmed today that personal tax rates for 2017 will be indexed by 1.3%.

The rate brackets will continue to be subject to inflation indexing, starting in 2017.  

As a result, Alberta’s personal income tax rates are:

Alberta Tax Rates

2016 Taxable Income

2017 and later Taxable Income

10.0%

$0 to $125,000

$0 to $126,625

12.0%

$125,001 to $150,000

$126,625 to $151,950

13.0%

$150,001 to $200,000

$151,950 to $202,600

14.0%

$200,001 to $300,000

$202,600 to $303,900

15.0%

$300,001 and over

$303,900 and over

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

2017

Interest and regular income

48.0%

48.0%

Capital gains

24.0%

24.0%

Eligible dividends

31.7%

31.7%

Non-eligible dividends

41.2%

41.2%

 

Combined federal and Alberta Personal Tax Rates 2017

Bracket

Ordinary Income*

Eligible dividends **

Non-eligible dividends **, ***

$202,601 to $202,800

43%

24.81%

35.39%

$202,801 to $303,900

47%

30.33%

40.07%

Above $303,900

48%

31.71%

41.24%

 * The rate on capital gains is ½ the ordinary income rate.
** The rates apply to the actual amount of the taxable dividends received from taxable Canadian corporations
*** Budget 2017 announced the intention to change Alberta’s dividend tax credit rate, which is not reflected in this table (see comments below).

Dividend tax credits

Non-eligible dividend tax credit improvements expected:

As a result of the changes in the federal components of the gross-up and dividend tax credit mechanism, the government will introduce legislation to adjust Alberta’s dividend tax credit rate on non-eligible dividends for 2017 and subsequent years.

The purpose of the adjustment is to ensure is to ensure that income earned in a small business and distributed out to shareholders will continue to be taxed at a minimum of 10%.  

The budget documents do not provide further details on these adjustments.

Political Contributions Tax Credit

The government is extending the Political Contributions Tax Credit to include contributions to party leadership and candidate nomination races that meet the criteria established under the Election Finances and Contributions Disclosure Act. 

This credit is worth 75% on the first $200 in donations, 50% on the next $900 and 33.33% on the next $1,200, for a maximum credit of $1,000 on a total contribution of $2,300. 

The change is effective for contributions made on or after January 1, 2017.

Alberta Non-Refundable Tax Credits

The government confirmed today that personal tax credits for 2017 will be indexed by 1.3%.

The maximum tax credits amounts and actual Alberta tax credits for 2016 and 2017 are set out below.

Alberta Non-Refundable Tax Credits

 

2016

2017

Maximum Amount

Alberta Tax Credit

Maximum Amount

Alberta Tax Credit

Basic Personal Amount

$18,451

$1,845

$18,690

$1,869

Spousal Amount

18,451

1,845

18,690

1,869

Eligible dependent amount

18,451

1,845

18,690

1,869

Age amount

5,141

514

5,208

521

Infirm dependent amount

10,680

1,068

10,820

1,082

CPP Contributions

2,544

254

2,564

256

EI Contributions

955

96

836

84

Pension income amount

1,421

142

1,439

144

Disability amount

14,232

1,423

14,417

1,442

Disability supplement

10,680

1,068

10,819

1,082

Tuition and education amounts

Variable

Variable

Variable

Variable

Adoption expenses

12,619

1,262

12,783

1,278

Medical expenses

Variable

Variable

Variable

Variable

Medical expenses (other dependents)

Variable

Variable

Variable

Variable

Caregiver amount

10,681

1,068

10,819

1,082

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

No changes to corporate taxes were announced. As a result, Alberta’s corporate income tax rates remain as follows:

Corporate Income 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

Note: As announced in Budget 2016, Alberta’s small-business corporate income tax rate was reduced from 3% to 2% effective 1 January 2017. The small-business limit remains at $500,000.

Other Measures (not related to income tax)

Alberta Investor Tax Credit (AITC)

The AITC provides a 30% tax credit for equity investments in eligible Alberta businesses that undertake research, development or commercialization of new technology, products or processes, as well as interactive digital media development, video post-production, digital animation or tourism.

  • Eligible corporations must apply to be enrolled in the program. Once approved, the corporation may be eligible for tax credit certificates.
    Note, however, that funding is provided on a first-come, first-served basis until the annual funding for the AITC program is fully allocated.
  • Individuals can then use their certificates to claim a refundable tax credit of up to $60,000 per year when filing their personal income tax returns.
  • Corporate investors can also claim the AITC, and while there is no maximum limit on the credit that can be claimed by the corporate investor, the tax credit is non-refundable.

Capital Investment Tax Credit (CITC)

The Capital Investment Tax Credit is a two-year program that provides a 10% non-refundable tax credit of up to $5 million on a corporation’s eligible capital expenditures on manufacturing, processing and tourism infrastructure.

Carbon Tax Levy

As of January 1, 2017, a carbon tax levy is applied to heating and transportation fuels such as diesel, gasoline, natural gas and propane.

As well, on that date the carbon levy is charged on sales of fossil fuels that emit greenhouse gases when combusted, at a rate of $20 per tonne, rising to $30 per tonne in 2018.  

In 2017, the $20 per tonne rate translates to rates of $4.49 cents per litre for gasoline, 5.35 cents per litre for diesel fuel and $1.011 per gigajoule for natural gas.

Education Property Tax

Property Tax Revenue:  The budget freezes the education property tax rates for 2017‑18.

As a result, the residential/farmland rate will remain at $2.48 per $1,000 of equalized assessment and the non‑residential rate will remain at $3.64.

Alberta Child Benefit and Alberta Employment Tax Credit

Families in Alberta can benefit from two refundable tax credit programs, the Alberta Child Benefit (ACB), which was introduced in the 2015 budget, and the Alberta Family Employment Tax Credit (AFETC).

Alberta Child Benefit

For 2017-18 benefit year, the ACB will provide families with annual benefits of up to $1,114 for one child and $557 for each of the next three children.

Families with net income of $25,832 or less receive the maximum benefit under the program.

Alberta Family Employment Tax Credit

For the 2017-18 benefit year, the AFETC will provide support starting from $773 to up to $2,038 to working families, based on the number of children in the family.

As the credit provides an incentive for parents to work, it applies when family working income reaches $2,760 and increases as income increases, up to the program maximum.

Benefits begin to be phased out once family net income exceeds $41,786.

Benefit amounts and phase-out thresholds for the ACB and AFETC are indexed to inflation annually and will rise 1.3% for the 2017-18 benefit year.

How Alberta Compares

The following chart compares top personal and corporate tax rates and sales taxes for all provinces and territories, as announced to March 16, 2017.

 

 

2017 Corporate Tax Rates

 

 

Top 2017 Personal Rates

General
%

M&P
%

Small Business
%

2017 Prov. Sales Tax

B.C.

47.70

26.00

26.00

13.00(1)

7.00

Alta.

48.00

27.00

27.00

12.50

-

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

26.80

26.80

18.50(2) 

9.975(6)

N.B.

53.30

29.00 

29.00

14.00(3)

10.00(5)

N.S.

54.00

31.00

31.00

13.50

10.00(5)

P.E.I.

51.37

31.00

31.00

15.00

10.00(5)

N.L.

51.30

30.00

30.00

13.50

10.00(5)

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. The small business tax rate will decrease to 12.5% effective April 1, 2017.
  2. Quebec provides a rate reduction from the small business rate eligible manufacturing small and medium-size enterprises (SMEs).  Where certain conditions are met, the maximum reduction available is 4%, for a combined rate 14.5%.  Note that a lesser reduction from the small business rate may be available to certain manufacturing SMEs where some, but not all conditions are met.
  3. The small business tax rate will decrease to 13.5% effective April 1, 2017.
  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 New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland & Labrador and 13% in Ontario.
  6. The QST system is harmonized with the GST, though two separate tax systems remain – the GST and the amended QST.  The combined rate is 14.975%.

(Source: Alberta Government)

"Try to save something while your salary is small; it’s impossible to save after you begin to earn more." — Jack Benny