As tax filing deadline looms, The Conference Board of Canada measures personal and business tax burdens
OTTAWA, May 2, 2016 /CNW/ - Alberta has one of the lowest provincial net business tax burdens among Canadian provinces, according to The Conference Board of Canada's new report, Benchmarking Provincial Tax Burdens. And despite the implementation of new income tax brackets in 2015, Alberta's personal tax burden is competitive with other provinces thanks in part to the absence of a provincial sales tax.
- Alberta's provincial net business tax burden is greater than that of only two provinces, Saskatchewan and New Brunswick.
- Property taxes account for a large part of the tax burden on businesses in Alberta.
This report compares the provincial tax burden on businesses and individuals among provinces based on the calculation of average provincial tax burden ratios. The analysis is based on data through 2011 for business taxation and 2012 for personal taxation (which were the most recent data available at the time this research was completed).
"Alberta's tax system has long stood out in Canada—due to the absence of a provincial sales tax and, until recently, by having a single personal income tax rate for all income levels," said Julie Adès, Senior Economist. "We are not yet able to assess the impact of the recent changes in personal taxation. However, since increased personal tax rates are concentrated among the highest income earners—and combined with the absence of a sales tax—Alberta can expect to have one of the more competitive personal tax burdens in the country."
In this analysis, Alberta's business tax regime has a higher provincial net tax burden than those of only two provinces, Saskatchewan and New Brunswick.
Alberta's provincial corporate income tax burden as a share of gross output in the business sector was the fifth-lowest among the provinces in this analysis, which pre-dates the increase in the corporate tax rate from 10 per cent to 12 per cent in 2015.
Social security contributions paid by employers are comparatively modest, and, of course, businesses in Alberta pay no provincial sales taxes. However, the property tax burden lessens Alberta's competitiveness on business taxation.
In terms of personal taxation, this analysis is based on the 10 per cent flat income tax rate that prevailed in Alberta until September 2015. The 10 per cent rate continues to apply to all those with personal income of less than $125,000.
This study shows that in all income ranges below $100,000, Alberta is second only to British Columbia as the province with the lowest provincial personal income tax burden (measured as provincial personal income tax as a share of total personal income).
Compared with neighbours Saskatchewan and British Columbia, the all-income-groups overall tax burden on individuals in Alberta (as a share of personal income) is lower in large part because the province does not apply a sales tax.
However, the Conference Board has recommended for a number of years that the province rethink its fiscal model and diversify its revenue sources away from volatile oil and gas royalties. A sales tax would bring more stability to government revenues, and help the province break its current boom-bust budget cycle.
This report does not assess the goods and services financed by governments through tax revenues.
Business taxation in the analysis includes: provincial corporate income taxes, social security contributions, payroll taxes, property taxes, and provincial sales taxes, as well as the provincial segments of the HST.
Personal taxation includes: provincial personal income taxes, social security contributions paid by employees, property taxes, and provincial sales taxes as well as the provincial segments of the HST.
Join Julie Adès and Matthew Stewart for a live webinar to discuss the findings for the provinces on June 1, 2016 at 12 noon MT.
The report was produced for the Centre for Tax Analysis, Fiscal Incentives and Competitiveness (TAFIC). Launched in 2014, TAFIC provides Canadian business leaders and policy-makers with credible, leading-edge quantitative research on all aspects of the Canadian system of taxation and fiscal incentives. Using sophisticated econometric tools to measure the impact of proposed reforms on the Canadian economy, TAFIC publishes evidence-based and accessible reports on key issues related to taxation and fiscal incentives.
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