Could Alberta's fiscal future include a provincial sales tax?

The problem with announcing economic forecasts in the age of COVID? The pandemic stubbornly refuses to listen.

Finance Minister Toews prepared to form a revenue panel to look at every option

A man in a suit.
Alberta Finance Minister Travis Toews speaks to at a news conference last year. (Juris Graney/CBC)

This column is an opinion from Graham Thomson, an award-winning journalist who has covered Alberta politics for more than 30 years. For more information about CBC's Opinion section, please see the FAQ.

There's good news and bad news in the Alberta government's second quarter fiscal update released on Tuesday.

The good news: the province's economy appears to be turning the corner on a path to recovery.

The bad news: that path might yet turn out to be a dark alley where COVID-19 and its gang of variants are waiting to welcome our economic recovery with billy clubs and machetes.

That's the problem with announcing economic forecasts in the age of COVID: the pandemic stubbornly refuses to listen.

Last Friday, global oil prices fell by more than 10 per cent when COVID's latest variant, omicron, sparked fears of renewed travel restrictions that would undermine the oil market's recovery.

On Tuesday, as Alberta Finance Minister Travis Toews was announcing encouraging news about the province's economy, oil prices fell again after Moderna warned that current COVID vaccines are unlikely to be as effective against omicron as they were against the delta variant.

"Oil prices are volatile, as we see today," said Toews by way of understatement. "And major fluctuations can be difficult to predict. It's a story Albertans have been living for decades but one most acutely lived in recent years."

And we'll continue to be tossed around in that fluctuating energy-price roller coaster for years to come, no matter how nauseating the ride.

A pumpjack works at a well head on an oil and gas installation near Cremona, Alta. (Jeff McIntosh/The Canadian Press)

Sometimes the ride is thrilling, when oil prices rise, as they did this year. Indeed, Albertans are enjoying a good kind of oil-price whiplash as royalties pour in from non-renewable resources, mostly from oilsands bitumen.

This year, the provincial treasury is on track to receive almost $11 billion in non-renewable resources, an increase of almost $8 billion from the original 2021-22 budget documents tabled last February.

That's both good news and bad. Good because higher revenue is always welcome; bad because Alberta relies too much on volatile energy prices.

We still suffer from more bad whiplashes than good on this roller coaster ride that turned into the Drop of Doom in 2015 when oil prices dropped over a cliff and again in 2020 when oil prices, for a time, toppled into the grave.

This year's provincial deficit — once projected to be $18 billion — is now forecast to drop below $6 billion. That's a whopping, and welcome, drop of $12 billion but it's almost entirely due to more money flowing from oil.

Even as it touts the future prospects for oil, the Alberta government is trying to diversify the economy and there are glimmers of hope.

Amazon Web Services is planning to spend $4.3 billion by 2037 on a cloud computing centre near Calgary.

But the government's multi-billion plan for blue hydrogen projects seems more aspirational than actual. And several other projects touted by the government have yet to receive final approval from investors.

Panel potential

So, what's a government to do when it knows diversifying the economy will take time but the government wants to increase revenue quickly?

Well, form a blue-ribbon panel to look at revenue as it did when it formed the MacKinnon panel to look at cutting expenses in 2019.

On Tuesday, Toews said he is committed to getting a revenue panel underway before the 2023 provincial election: "Yes, that would be my desire, to launch the panel before the next election."

Not only that, Toews said he'd want to give the panel "a blank sheet of paper" where he "won't take anything off the table."

Would he consider embracing the ever-controversial provincial sales tax?

"We're not going to a sales tax or any new tax at this point in time," said Toews, who used the phrase "at this point in time" twice which, of course, is politician-speak for "I'm saying 'no' right now, but might say 'yes' later."

If he really wants to hear a "yes" — to give himself cover from the anti-PST crowd — all Toews needs to do is pack his revenue panel full of economists.

Just about every economist who has studied the issue in Alberta has come to the conclusion that it's time the province changed its tax regime to include either a PST or a harmonized sales tax where Ottawa collects the tax along with the federal GST.

In 2011, for example, when Ed Stelmach was premier, a blue-ribbon panel of experts released a report called Shaping Alberta's Future that recommended the province stop spending energy revenue, start investing the money into a fund to support economic diversification, and consider introducing a provincial sales tax. Stelmach ignored the advice.

In 2013, an "Alberta Economic Summit" convened by then-premier Alison Redford, saw expert after expert testify to the merits of a PST. But she too ignored their advice.

For years, economist Jack Mintz — Kenney's go-to fiscal expert — has spoken in favour of revamping Alberta's tax system.

"An Alberta sales tax is less harmful to the economy than both corporate and personal income taxes, as countless studies have shown," said Mintz who has argued it would be better to switch from a revenue system based on income taxes to one based on consumption taxes, whether it be user fees, excise taxes or a sales tax.

Politics and timing

Under Alberta law, a government can't introduce a sales tax until it's approved by a public referendum — and Albertans are famously opposed to a PST. But a revenue panel shouldn't be worried about politics; just whether the tax makes sense.

In that case, it seems almost inevitable a panel of fiscal experts would support the introduction of a PST and Toews must know this.

So, you'd have to think if he forms the panel before the election he'd make sure it didn't report back until after the election.

Alberta's economy might be on the mend but we have yet to see if the popularity of Premier Jason Kenney and the UCP will bounce back.

"Our economic recovery is becoming more entrenched," said Toews on Tuesday. He might not want to say that too loudly. COVID-19 and its mob of variants might be listening.


Graham Thomson

Freelance contributor

Graham Thomson is an award-winning journalist who has covered Alberta politics for more than 30 years, much of it as an outspoken columnist for the Edmonton Journal. Nowadays you can find his thoughts and analysis on provincial politics Fridays at cbc.ca/edmonton, on CBC Edmonton Television News, during Radio Active on CBC Radio One (93.9FM/740AM) and on Twitter at @gthomsonink.