CALGARY, Sept. 24, 2013 /CNW/ - The thought of paying zero provincial income taxes may seem like fantasy to Albertans. But, if the province were to implement a Harmonized Sales Tax (HST), it could be reality for a large portion of the population.
In a report published today by The School of Public Policy, authors Jack Mintz and Philip Bazel examine the effects that introducing a provincial HST of eight per cent (combined with the five per cent GST) would have for Alberta's citizens, government revenue and the province's business environment.
"It would enable the province to raise the income-tax exemption from $17,593 to $57,250, making it possible for couples to earn up to $114,500 free of any provincial income taxes," the authors write. "In addition, the province could lower income tax rates for income over that amount from 10 to nine per cent as well as introduce a low-income sales tax credit."
Mintz and Bazel argue that Alberta currently relies far too much on corporate and personal income taxes rather than consumption taxes (like an HST) and that this is detrimental to the economy because it makes the province less attractive to investment.
"With the revenue from the HST, Alberta would have the capacity to lower its general corporate income tax from 10 to 8.43 per cent, reducing taxes on investment," the authors write.
Meanwhile, the prospect of capturing the HST associated with non-resident tourism is another benefit for all Albertans. HST associated with non-resident consumption currently represents forgone revenue for the province of around $800 million. This revenue could be used to fund public services along with a $1.3 billion transition payment from the federal government.
The idea of an Alberta sales tax has been floated before, with many politicians taking a firm stance against it. One possible counter-argument is that there would be a high cost of implementation. However, Mintz and Bazel quash this concern, arguing that an HST could easily be administered using the same collection mechanisms already in place for the GST.
"The task of persuading the public must fall to bold politicians," they write. "But if provincial legislators truly value tax fairness, competitiveness, and the future fiscal stability of the province, they have a duty to convince voters that an HST is the right choice for Alberta."
The report can be found at http://www.policyschool.ucalgary.ca/?q=content/enhancing-alberta-tax-advantage-harmonized-sales-tax
SOURCE: The School of Public Policy - University of Calgary
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