Five business tax credits scrapped; UCP abandons targeted programs in favour of lower corporate taxes
|calgaryherald.com 24 Oct 2019 at 17:52|
The future of the Alberta Investor Tax Credit — which was introduced by the previous NDP government and provided a 30 per cent tax credit to investors who put money into targeted growth industries like clean technology and digital animation — has been up in the air since Premier Jason Kenney’s government was elected this spring.
In Thursday’s provincial budget, the UCP confirmed it will eliminate the program, along with four other targeted tax credits intended to support business and economic diversification in Alberta.
The Capital Investment Tax Credit, the Community Economic Development Corporation Tax Credit, the Capital Investment Tax Credit, the Interactive Digital Media Tax Credit and the Scientific Research and Experimental Development Tax Credit are all being cancelled, a move the government says will result in $400 million in savings by 2022-23.
The UCP said the programs have been hampered by red tape and have been shown to be a relatively inefficient way of delivering benefits to businesses.
It said its move to lower the corporate tax rate for all businesses to 8 per cent from 12 per cent by 2022 is a better way to support job creation and grow the economy, since 10,000 Alberta companies will benefit from the tax cut while only 1,500 companies would have benefited from the five tax credit programs.
The corporate tax cut translates into a net $2.4-billion revenue reduction for the government over four years.
“We made a commitment to Albertans that we were going to implement initiatives that increase job opportunities and improve the economy, and that’s why we implemented the Job Creation Tax Cut,” Finance Minister Travis Toews told reporters. “Research upon research upon research has demonstrated that as you improve the business environment, as you reduce the taxes in the business environment, you attract investment and create jobs in the long term.”
Toews said reducing the corporate tax rate is expected to lead to $4 billion annually in increased investment in Alberta by 2022-23, and will encourage sustainable diversification of the economy without relying on government handouts.
However, not everyone believes an across-the-board tax cut is preferable to the cancelled tax credits.
Many people in Alberta’s burgeoning tech sector say the Investor Tax Credit in particular — which had approved $28.1 million in tax credits by the end of 2018 and leveraged $94 million in investment for small and mid-sized businesses — helped to get much-needed venture capital into the hands of new industries in a province where investment dollars have typically gone to oil and gas.
In an interview in August, Adrian Camara, CEO of Calgary-based Athennian, said cancellation of the program could derail startup companies’ ability to attract early-stage financing.
“I think there is a risk that they (the government) are going to totally deflate momentum in the technology community here.”
The Calgary Chamber of Commerce — while a vocal supporter of lower corporate taxes — had also been a supporter of the investor tax credit and had lobbied the previous NDP government to create the program.
The government said broad-based business tax cuts have already been proven to work in Alberta.
According to the budget document, a low-rate, broad-based corporate tax approach was provincial policy from 2001 to 2014, and during that time, Alberta led all provinces in growth across nearly every industry sector — with growth in non-resource sectors generally outpacing that in the resource sector.