On March 22, 2018, Finance Minister Joe Ceci tabled Alberta’s 2018-19 budget. This budget sees the province emerging from a time of economic recession with a focus on diversifying its resource-based economy to one that is resilient, stable and less vulnerable to future changes in the price of oil.
To accomplish its goals, the province’s NDP government has outlined three main areas of focus: diversifying the economy, protecting vital public services and returning the province to fiscal balance. It has been announced that the province will focus on controlling spending, eliminating waste and finding efficiencies in order to balance the budget by 2023, and then begin to focus on reducing the net debt levels.
The government has outlined in this budget its plan to achieve fiscal balance by gradually reducing the deficit over the next six years and is projecting a surplus by the 2023-24 fiscal year.
Fiscal results are projected as follows:
It is worth noting that these projections rely on increased personal and corporate taxation revenues that account for 31.4% of total revenues in 2017-18 and 34.1% of total revenues in 2020-21. This increase represents growth; however, this growth is reliant on the economic performance of the province, which remains reliant on the performance of the oil and gas sector.
Furthermore, these projections are based on the assumption that the Enbridge Line 3 replacement pipeline will commence operations in 2019 and the TransCanada Keystone XL and Kinder Morgan TransMountain Expansion pipelines will commence operations by 2021.
While the deficit is projected to decrease, the province’s net debt levels are expected to increase substantially over the next few years, from $20.3 billion forecasted for the 2017-18 fiscal year to $56 billion projected for the 2023-24 fiscal year.
Interactive Digital Media Tax Credit
To provide additional support for Alberta’s interactive digital media sector, the refundable Interactive Digital Media Tax Credit has been introduced. This credit will provide eligible interactive digital media companies with a benefit equal to 25% of eligible labour costs incurred after April 1, 2018.
An additional 5% diversity and inclusion credit enhancement may also be available where the eligible corporation employs workers from under-represented groups. Further detail regarding this enhancement will be provided when the regulations are brought forward.
This program will provide a maximum funding of $20 million per year and additional details relating to the application and eligibility requirements will be available by summer 2018.
Alberta Child Benefit (ACB)
The benefits provided under the ACB have also been increased for the 2018-19 benefit year. As a result of this increase, the phase-out threshold for the ACB will be increased from a family net income of $41,786 to $42,255, and families with a net income of up to $26,141 will receive the maximum benefit of this refundable credit (up from $25,832 in 2017-18).
Families with one child will be eligible for a maximum annual benefit of $1,128 ($1,114 for 2017-18), with an additional annual benefit of $564 ($557 for 2017-18) for each of the next three children; therefore, families with four or more children will be eligible to receive a maximum annual benefit of $2,820 ($2,785 for 2017-18).
The 2018 provincial budget notes that Alberta has agreed in principle to enter into a coordinated framework with the federal government regarding the taxation of cannabis, covering the first two years of legalization. Under this framework, the greater of $1 per gram or 10% of the producer price will be collected, with the province receiving 75% of this tax room. The province will also be allowed to collect an additional tax of up to 10% of the retail price.
Both the federal and provincial duties will be collected by the federal government. Federal collection of these amounts will minimize administration costs to the provincial governments and compliance costs to business.