2014-2015 Alberta budget highlights
Canadian tax alert
March 7, 2014
Read a summary of the Alberta budget highlights from Deloitte's tax professionals
Alberta Minister of Finance, Doug Horner, presented the 2014-2015 Alberta budget yesterday afternoon. This budget will see operating expenses increase at a rate of 3.6%. The budget notes:
- Gross domestic product growth of 3.7% in 2014, declining to 3.0% in 2015.
- 2013-2014 forecast expenses of $42.3 billion and revenue of $44.7 billion representing a projected surplus of $2.4 billion.
- 2014-2015 budget expenses of $40.3 billion and revenue of $44.3 billion, representing a projected surplus of $4.0 billion.
- Non-renewable resource revenue of $9.2 billion, up from $8.6 billion in 2013-2014.
- Personal income tax revenue $11.1 billion, up from $10.5 in 2013-2014.
- Main spending increases occurring in health ($18.3 billion, up from $17.6 billion) and education ($6.5 billion, up from $6.3 billion).
- Capital spending plan of $19.2 billion over 3 years with $6.6 billion being spent in 2014-2015.
- No new taxes or rate increases.
The 2014-2015 budget reflects in part the continued strength in resource revenues. It also acknowledges that the oil sands sub-sector is moving into a pronounced production phase following years of capital investment; this is expected to lead to an increase in exports and a corresponding increase in royalty revenues. However, the budget also acknowledges the ongoing challenge of reaching new markets, underscoring both the sensitivity of the Alberta economy to small changes in commodity prices and productivity growth as well as the need for oil sands producers in particular to continue to invest in operational efficiencies. (For more of our thoughts on oil sands operational management, see our report Gaining ground in the sands 2014.)
Projected resource prices used in the budget are as follows:
- West Texas Intermediate (US$/bbl): $95.22
- Western Canada Select (Cdn$/bbl): $77.18
- Natural gas (Cdn$/gj): $3.29
These prices appear to be in line with current market conditions, and are even slightly conservative – evidence that the government has learned from last year’s revenue shortfall that was attributed to flawed commodity price forecasting methodology.
Budget 2014-2015 includes no new taxes or tax increases. However, several changes were announced:
- The budget proposes to introduce rules that will parallel the federal rules with respect to qualifying environmental trusts.
- To offset the decrease in the gross up on dividends paid by small business corporations, the government will adjust the Alberta dividend tax credit to 3.1% to leave the taxation of dividends unchanged from prior years.
- The government will adjust personal credits by 1.1% to reflect inflation.
- The budget proposes to reduce the mill rates for the education property tax by 4.5%.
Other measures of note
Prior to the budget, the government announced a new Social Innovation Endowment. Created in the first bill tabled in the new legislative sitting, the Endowment will have a $1 billion capitalization (funded immediately with $500M in FY2014-2015 and an additional $500M in FY2015-2016), and will annually disburse 4.5% of its market value to Alberta organizations that are experimenting with new ways of addressing social issues, including poverty and family violence. Deloitte Research believes that this Endowment is the first of its kind in Canada, and makes it the largest endowed social innovation fund in North America. This is encouraging because we also recognize that, where tough societal problems persist, citizens, business and social enterprises are relying less and less on government-only solutions. New imaginative models must be developed to meet real social needs at lower costs, resulting in better results – what we call the “Solution Revolution.”
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