Sales tax needed for Alberta advantage: study
Alberta needs to reorganize its tax structure — possibly introducing a provincial sales tax — if it wants to stay afloat amid a rising deficit and a loss of energy revenue, says a new report.
Tax expert Jack Mintz, head of the School of Public Policy at the University of Calgary, suggests in the report that the province could slash income taxes if it adopted a sales tax.
"If Alberta adopted an eight per cent value-added tax, it could reduce its corporate and personal income taxes from 10 to five per cent," he said on Wednesday.
Alberta currently has no provincial sales tax, a feature that attracts workers, investors and businesses. But the province is forecasting a record $6.9-billion deficit this fiscal year.
"Alberta remains too reliant on volatile, growth-deterring tax policies. Instead, the province needs a tax structure that enhances growth," Mintz says in his report, "Will Alberta lose its tax advantage?"
The province's tax structure has not shifted to reflect changing pressures, he suggests, while other jurisdictions have been focusing on cutting personal and corporate income taxes in favour of other sources of revenue.
"Alberta's tax advantage … is diminishing as tax regimes in other provinces become more competitive," wrote Mintz, pointing to harmonized sales taxes in Atlantic Canada and Quebec, and sharp declines in corporate tax rates in New Brunswick.
The report recommends that Alberta increase levies on private and public consumption, such as user fees for water and non-critical health services. Mintz goes on to call adopting a provincial sales tax "an even braver strategy."
"I am not suggesting that we raise taxes; in fact what I am suggesting is that you keep a lid on taxes and maintain advantages," he explained.
Badge of honour
Scott Hennig, the Alberta director for the Canadian Taxpayers Federation, said a sales tax would not be popular with Albertans.
"We have not had a sales tax in this province since the 1930s and even then it was only for about a year and that's sort of a badge of honour for a lot of Albertans," he said. "Even when offered the opportunity just to have their taxes go down, they still don't favour moving to a sales tax."
He pointed out that any proposed sales tax would first have to pass a provincial referendum, a requirement under the Alberta Taxpayer Protection Act.
A provincial government spokeswoman said a sales tax is not being considered. "It's not on the table," said Robyn Cochrane with Alberta Finance.