On February 25, 2021, President of the Treasury Board and Minister of Finance, Travis Toews, delivered the 2021 Alberta budget. Grappling with the ongoing pandemic and collapsed oil prices, this year’s budget eschews the so-called “fiscal reckoning” in favour of continuing to support Albertans through further investments in healthcare and several initiatives designed to facilitate the province’s economic recovery. Projecting a deficit of $18.2 billion, the budget includes funding for programs to create jobs, build infrastructure, and diversify Alberta’s economy.
As promised in the lead up to Thursday’s announcement, the budget contains no new tax increases. While the current provincial government generally believes that tax increases undermine economic recovery and future growth, it has acknowledged that, at some point in the future—presumably after the pandemic—it may be necessary to revisit Alberta’s provincial tax system.
In the meantime, a few significant tax measures and several interesting government funding programs were included in this year’s budget, as summarized below.
At the present time, the government has decided not to implement any of the proposed changes to the assessment model for regulated oil and gas properties that were identified in a comprehensive review completed last year. However, significant changes for this sector typically stem from directives of Alberta Municipal Affairs, and a few previously announced initiatives have been codified to produce tax changes for ratepayers in 2021 and beyond.
This year’s budget included the following property tax measures for the oil and gas sector:
- Implementation of a three-year property tax holiday for all new well and pipeline assets;
- Elimination of the Well Drilling Equipment Tax from 2021 onward;
- Maintaining the shallow gas assessment reduction of 35% over the next three years; and
- Providing additional depreciation adjustments for lower-producing wells.
As indicated in the budget’s strategic plan, the government’s intention is that “These initiatives will encourage new investment in the oil and gas sector and support the continued viability of existing assets.” Given recent changes to the assessment regulations—and several others under consideration—it is recommended that taxpayers undertake an annual review of property tax liabilities in Alberta to ensure accuracy and compliance with regulatory developments.
The government also noted that Education Property Tax rates will remain frozen at 2019–20 levels. However, there will be a slight upward adjustment to mill rates (1 cent per $1,000 of equalized assessment) to offset the recent reduction in property assessment values.
While the budget did not contain any proposed changes to the Tourism Levy, it did reaffirm two measures that were announced in 2020.
Under a Tourism Levy abatement announced and then extended in 2020, accommodation providers are not required to remit levy amounts charged to customers between March 1, 2020 and March 31, 2021. While operators must continue to file Tourism Levy returns for the abatement period, any funds collected may be kept for the accommodation provider’s own use.
In this year’s budget, the province took the opportunity to remind operators of short-term accommodation rentals provided through online marketplaces (e.g., Airbnb, Vrbo, etc.) that such rentals will be subject to the Tourism Levy, effective April 1, 2021. To ease the collection and compliance burden, online marketplaces have been granted the ability to collect and remit the levy on behalf of short-term rental operators. Unfortunately, any short-term rental operator using an online marketplace that does not collect the levy on its behalf will be required to register and collect the levy on taxable rentals.
In addition, effective April 1, 2021, the exemption available to short-term rental properties with fewer than four separate rental bedrooms will be eliminated. At the same time, a new exemption will be put in place for short-term rental properties not listed through an online marketplace where the operator’s gross annual Alberta revenues are less than $5,000, or the rental rate of the property is less than $30 per day or $210 per week.
No corporate or personal income tax rate changes were introduced in this year’s budget. However, the government did remind taxpayers that the accelerated Job Creation Tax Cut reduced the general corporate income tax rate in Alberta from 12% to 8% on July 1, 2020.
Alberta’s economic recovery plan includes an investment of $1.5 billion over four years to support key economic sectors that will build and diversify the provincial economy, while creating tens of thousands of jobs. Key sectors targeted for funding under the province’s investment and growth strategy include: agriculture and forestry; tourism; technology and innovation; energy; aviation, aerospace, and logistics; finance and “fintech” (financial technology); and culture.
Several investments have been proposed to increase Alberta’s competitiveness, improve its investment ecosystem, promote the province’s attractive business environment, stimulate research and development, help workers adapt to the changing economy, and position Alberta as a sustainable energy leader. Specific investments noted in the budget documents include
- $166 million over 3 years for the Innovation Employment Grant;
- $136 million over 3 years for the Alberta Jobs Now program;
- Continued investments in the Site Rehabilitation and Technology Innovation and Emissions Reduction programs;
- $7 million for the Work Integrated Learning Opportunities for Alberta Students program;
- $10 million for the Enterprise Fund for high-impact investments; and
- $15 million for a stabilization program to support music, performing arts, and landmark cultural events.
In addition, the government announced an Enhanced COVID-19 Business Benefit, which will provide non-repayable grants to eligible small and medium businesses calculated based on 15% of monthly revenue, to a maximum of $10,000. Eligible businesses must have fewer than 500 employees and experienced a revenue reduction of at least 60%. More information on this enhanced program is expected to be released in April.
Further information on Alberta’s 2021 budget may be found on the province’s website at: https://www.alberta.ca/budget.aspx.
If you have any questions about how these proposed changes might impact your organization, please do not hesitate to call the Ryan TaxDirect® line at 1.800.667.1600.