Alberta should consider a new sales tax, new carbon regime: Business council
The Business Council of Alberta (BCA) is urging the province to consider implementing a new sales tax and to take hold of its own carbon pricing fate in order to repair some of the fiscal damage done by the global pandemic and years of weak energy prices.
In a report released Wednesday, the BCA said those measures would help bridge the gap between government expenditures and revenues, and smooth out the impact of volatile commodity prices on provincial coffers. Alberta is currently the only province that does not impose a provincial or harmonized sales tax.
In a release, Business Council of Alberta President Adam Legge said the province’s insistence to buck the trend and paper over the impact of higher per capita spending relative to other provinces with resource revenues has left it in an untenable position.
“For decades, governments have spent too much, and collected too little in taxes, because we could make up the difference with resource revenues,” Legge said. “We can’t count on that in the future, and our trajectory is unsustainable. We need to make some tough decisions about our revenues and expenses to bring Alberta back to a more sustainable position.”
Year-over-year changes in resource revenues have proven particularly volatile due to economic and geopolitical shocks, seeing yearly increases of as much as $8.3 billion, and drops by as much as $6.7 billion over the last two decades.
Alberta is currently projected to post a record-setting $21.3-billion deficit in 2020-21, though deficit spending at the national and sub-national level is ubiquitous in the face of the COVID pandemic.
While implementing a PST or HST framework would be a boost to provincial coffers, the issue has long been a political third rail in the province.
Rachel Notley’s NDP government briefly flirted with the idea of implementing a provincial levee in 2015, but ultimately abandoned the plan when it proved unpalatable to the electoral base. More recently, Premier Jason Kenney’s United Conservative Party has said it could consider a potential tax, but not before the province clears the worst of the pandemic and assesses the budgetary impact of other spending cuts.
Both taxes could help the province achieve the three anchors laid out in Alberta’s most recent fiscal update, which saw the province pledge to align public spending with roughly-comparable provinces, keep debt below 30 per cent of gross domestic product and balance the budget and repay debt over time.
As much as a provincial sales tax has proven unpopular among Albertans, a price on carbon has stolen the headlines in recent years. The province challenged the legality of a federal levee on emissions, but ultimately had Ottawa’s framework imposed upon it after failing to come up with an alternative the feds deemed acceptable.
Though Ottawa’s plan is designed as revenue-neutral in order to return taxes to households through rebates, the BCA said the province could potentially use a carbon levee to raise funds.
Alberta could look immediately west for inspiration if it looked to generate revenue from a carbon regime of its own. Under British Columbia’s carbon regime rebates are issued to low- and medium-income households, with any additional taxes collected flowing into provincial coffers.
While Albertans have proven resistant to any further value-added taxes, the province was actually the first jurisdiction in Canada to implement some form of a sales tax. In 1936, shortly after Alberta became the first province to default on its bonds, the province implemented a three-per-cent “ultimate purchases tax” on goods and services. The tax was quickly repealed amid public backlash.