Alberta’s 2019 budget is a tough course correction to get to a business-forward environment
November 7, 2019
On October 24, the provincial government tabled Budget 2019, the first under the new United Conservative Party (UCP) administration.
The budget outlines the UCP’s plan to return to a surplus position in 2022-23 by cutting the province’s spending by 2.8 per cent over the next four years. The spending restraint in the budget follows the recommendations made by the MacKinnon Report completed in August and made public in September.
Although this is undoubtedly a tough budget, it is the course correction Alberta needs to move towards a business-forward environment, and sets the province up to be more competitive in the long run.
Here’s a recap of some of the highs and challenges of the Budget.
What we liked
2019 Budget follows many of the recommendations made by the Calgary Chamber in our provincial election platform, released in February. Out of our nine total recommendation areas, we were pleased to see meaningful action on four.
Returning to balance
The fiscal plan tabled by Finance Minister Travis Toews outlines a path to return to a surplus of $584 million by the 2022-23 fiscal year. A balanced budget signals that the province is a stable place for investment, while continued deficits only add to the uncertainty about future tax increases to service and repay government debt.
Lowering the corporate tax rate
Budget 2019 reaffirms the current government’s commitment to lowering the corporate income tax (CIT) rate in the province. As introduced in the Job Creation Tax Cut earlier this fall, the budget plans for a reduction of the CIT rate from 12 per cent to eight per cent by January 1, 2022. A reduced corporate tax rate helps restore Alberta’s competitiveness by encouraging businesses to invest in the province, which in turn grows our tax base.
Identify and address the skills gap in Alberta
Budget 2019 also has a focus on training the future workforce in Alberta, which will help shrink the skills gap that currently exists. Apprenticeship training and accountability to deliver workforce-relevant programming to educate, re-skill and upskill all ages of postsecondary learners to meet the demands of the future economy are expressed commitments made by the provincial government and we look forward to these grants being made available.
Reducing regulatory burden on business
Removing unnecessary red tape is also another initiative recommended by the Calgary Chamber that the current government has adopted. Red tape reduction across all government departments, combined with streamlined processes and services are expected to create a minimum $140 million in savings for the province. In addition to monetary savings, the initiatives will also reduce the administrative costs of doing business in our province.
Some progress on climate policy to promote competitiveness and support innovation
We are encouraged to see the provincial government move forward on climate policy with the introduction of the Technology Innovation and Emissions Reduction (TIER) program.
The program is expected to be a reliable source of income for the province while supporting the adoption of new climate technologies, and the responsible development principles our natural resources sector already is committed to. However, the program is less stringent than the previous NDP government’s Carbon Competitiveness Incentive Regulation (CCIR), and not all income raised will be dedicated to innovation. We have conducted a deeper analysis on the TIER program, which can be accessed here.
Investment attraction and retention
The Chamber is also encouraged by the provincial government’s commitment to adopting Enhanced Capital Cost Allowances (CCA) to encourage new investments in Alberta. Similar to the federal program, the CCA would allow corporations to claim depreciation at an accelerated rate by allowing businesses to completely expense the costs of manufacturing and processing equipment as well as clean energy generation equipment within the first year of when they are available for use. The program will be completely phased out by 2027, but in the meantime, encourages investments into Alberta. The program will be providing up to $900 million in tax deferrals between 2018-2019 to 2022-23 fiscal years.
What we didn’t like
Despite meaningful progress on several of our recommendations, the Calgary Chamber believes Budget 2019 fell short on a few key areas.
Elimination of tax credits for technology and capital investment
While we appreciate and respect the Alberta government’s current strategy of taking a broad-based tax approach, we are disappointed by the decision to eliminate the following tax credits:
- Alberta Investor Tax Credit
- Community Economic Development Corporation Tax Credit
- Capital Investment Tax Credit
- Interactive Digital Media Tax Credit
- Scientific Research and Experimental Development Tax Credit
These tax credits offered much needed capital for investments into growing sectors of our economy that benefit from a targeted approach. The Calgary Chamber advocated for the expansion of these programs during the writ period, as many of our members have benefitted and grown their businesses as a result of having access to these credits.
The Government of Alberta has stated the decision to move away from these credits was to simplify fiscal policy in the province while reducing red tape. We will remain closely engaged to ensure that the benefits of eliminating these programs will outweigh the costs for small and growing businesses. Abandoning effective initiatives for technology and innovation growth as a means to diversify government revenue streams is short-sighted.
What we’re waiting to learn more about
How Alberta can diversify its sources of revenue
Budget 2019 addresses the spending problem highlighted in the MacKinnon report. However, responsible budgeting requires consideration of both spending and income variables. We cannot evolve by focusing on one part of the equation, we must look at spending AND income concurrently. In this budget, we see don’t see a significant shift on the income side of the equation. We encourage the government of Alberta to explore options to diversify their sources of revenue.
More investment attraction initiatives
The Chamber is also interested in the investment attractiveness of the province. While the policy initiatives that have been taken to create a business-forward environment is great for the province, we must actively engage in telling our story and understand that investments will take time to come back to the province. We look forward to working with the government to encourage investments in Alberta and develop plans for maintaining our vibrant business community between now and the arrival of new capital.
While we are encouraged by a good portion of the budget, the Calgary Chamber will continue to work through the recommendations made in our provincial election platform.
The remaining recommendations include committing to long-term fiscal planning, implementing a “layered cost” economic impact assessment and a comprehensive tax review. We look forward to working with the government to implement these recommendations going forward.
The Calgary Chamber would be pleased to host a round table between industries and the government to aid with tax policy development that spurs innovation and technology growth in our province.