Critics say B.C. made corporate tax work

‘A point or two would not be the end of the world,’ economist claims

If the right-of-centre British Columbia government can raise its corporate tax rate, how about Alberta? That’s a question critics are asking in the wake of the spring budget that hits ordinary Albertans with a plethora of new taxes.

Premier Jim Prentice continues to defend his decision not to raise Alberta’s corporate taxes, citing fear of job losses in uncertain economic times.

But critics say that didn’t happen when the Liberal government of B.C. Premier Christy Clark raised its corporate tax to 11 per cent in April 2013, to find $250 million to keep the red ink off its books.

That increase put B.C.’s rate one point higher than Alberta’s rate of 10 per cent — the lowest in the country — said Gil McGowan of the Alberta Federation of Labour.

Throughout that year, B.C. jobs increased by 12,200, he added.

Tax policy expert and economist Jack Mintz, who advised Prentice on corporate tax policy, said a similar one-point increase in Alberta would send a negative signal on the already uncertain economy.

As well, it would provoke 9,000 job losses for each point upward, said Mintz, director of the School of Public Policy at the University of Calgary.

Those figures are based on Mintz’s tax modelling from a 2010 research paper. At a request from the premier’s office, he provided updated figures for Alberta, said Mintz, adding he has also advised Ontario on corporate taxes.

Mintz also noted corporate tax increases are passed on to consumers in higher prices and can lead to layoffs.

A one-point increase would bring in about $400 to 300 million to government, he said.

Compared to Alberta’s 10-percent corporate tax rate, Saskatchewan and Manitoba have a 12-percent rate, while Nova Scotia and PEI are highest at 16 per cent.

Ontario’s corporate tax rate is 11.5, Quebec’s is 11.9 and Newfoundland’s rate is 14 per cent.

Kevin Mulligan, economist at the University of British Columbia, said the one-per-cent increase there has not had a “massive impact” on the provincial economy.

“A point or two would not be the end of the world,” he said. “But these things are sensitive.”

Alberta is in the midst of economic uncertainty with oil prices below $50 a barrel, he said. The government will want to make sure the rest of the economy is strong.

Also, many companies move their profits to lower-tax places when tax rates shift.

While Alberta is the low tax haven here, Quebec, for instance, has other incentives that lure some companies to that province, he added.

McGowan disputed the fear that business would move profits out. “Those lower tax jurisdictions don’t exist” as all provinces have a higher corporate tax rate than Alberta.

Also, fear of job losses are overblown, he said. While all jobs are important, a potential loss of 8,000 jobs in a labour force of 2.3 million working people is not a large number.

McGowan also noted 80 per cent of Alberta companies qualify for the small business tax rate ( less than $500 million in revenue) and no one is suggesting that rate (five per cent on profits) be raised, he added. The spring budget predicts a decline of about 20 per cent in corporate tax revenue to $4.5 billion, from $5.7 billion in the last fiscal year.