Canadian Manufacturing

Prentice considering sales tax; scoffs at Alberta recession talks

Alberta Premier Jim Prentice conceded provincial sales tax up for discussion as low oil prices continue hurt bottom line

EDMONTON—Alberta’s prideful boast of being the only jurisdiction in Canada without a provincial sales tax may soon be history as Premier Jim Prentice looks to protect the province from falling oil prices.

“I didn’t find their analysis to be particularly cogent, to be frank, and the opinion that they put forward is an outlier amongst all of the other opinions that have been put forward by every one of Canada’s chartered banks and by other respected economic forecasters,” Prentice said of the report.

After declaring for weeks that a sales tax was off the table, Prentice conceded that it’s up for discussion as low oil prices continue to bleed billions of dollars from the treasury.

“I don’t think Albertans generally advocate a sales tax, but I’m prepared to be educated and to hear from people,” Prentice said.

The sales tax talk comes as the premier looks to brush off a suggestion by the Conference Board of Canada that Alberta is likely to face a recession as crude prices continue to plunge.

Glen Hodgson, chief economist with the Ottawa-based think-tank, said even if oil prices rebound to US$65 dollars a barrel, investment, profits and consumer spending will be down.

Oil prices settled below US$46 a barrel on Jan. 13, less than half of where they were less than six months ago.

Lower oil revenues are hurting Alberta’s coffers, with the province’s budget surplus this year turning into a $500-million deficit.

Todd Hirsch, chief economist at ATB Financial, also disagreed that the Alberta economy is going to shrink this year, though he conceded a projected growth rate of two per cent in Alberta—about half of what the province has experienced over the past four years—”may actually feel a bit recessionary.”

He said the Conference Board and ATB, Alberta’s Crown-owned financial institution, are on the same page when it comes to a gloomy forecast for this year, but they differ on how long they expect the downturn to last.

Prentice, meanwhile, told reporters that a sales tax is not his preferred choice.

“I’m not embracing a sales tax. Let’s be clear,” he said. “I’ve simply said I want to hear what Albertans think about cost containment, about deficits and about revenue increments to the government.

“Certainly there are people who have views about a sales tax, and I welcome their opinions.”

ATB’s Hirsch said a gas tax might be the way to go.

“I know a sales tax isn’t going to be on the table for anybody, but maybe the introduction of a B.C.-style gasoline tax,” Hirsch said. “With gas prices in Edmonton at 72 cents and 79 cents (a litre), now is the time to do this.”

Hirsch questioned whether a sales taxes would be good idea with Alberta’s economy slowing down.

“What they might want to do is say, ‘When the economy picks back up and we’re growing at four per cent, then we’ll introduce a sales tax and then maybe some other stable source of revenue,'” he continued.

Still, Prentice said government members will fan out to communities in the coming weeks to hear firsthand from Albertans on what needs to be done, given forecasts that low oil prices may last for several years.

Decisions flowing from those conversations will be reflected in the upcoming budget, but said he’s also working on a multi-year plan to balance the books and get Alberta off the roller coaster of fluctuating oil prices.

The government will also listen to arguments on any changes to the tax structure, including Alberta’s 10 per cent flat tax on income that critics say benefits the wealthy at the expense of the middle class.

The province, with a $40-billion budget, expects to take in $17 billion in combined corporate and personal income tax this year.

Prentice also said public-sector workers are among the best paid in Canada and will need to step up in tough times.

He didn’t elaborate.

“I’m not here to criticize doctors or nurses or teachers,” Prentice said, “(but) in every level of public employment we have we are paying vastly more than anyone else in the country. And it’s not sustainable.

“We’re going to have to start containing costs and ratcheting costs down, at the same time being innovative and leading the country.”

NDP critic Brian Mason said the Progressive Conservatives have failed for decades to diversify the provincial economy, which has left Alberta perpetually hostage to boom-and-bust cycles.

“I don’t think that it’s fair, nor do I think people will accept, that the middle class and working families in this province are being asked once again to bear the brunt of the government’s economic mistakes,” Mason said.

Opposition Wildrose critic Shayne Saskiw said there is no need for new taxes or tax increases.

The budget, he said, contains enough bloat and excess that can be cut without compromising service.

“You can’t tax your way out of a recession,” said Saskiw. “There’s so much waste in this government, we need look at all the waste.”

Prentice said the problem cannot be solved by cutting alone.

“Fifteen per cent of the province’s revenue stream has evaporated,” he said. “We can’t go on like this.”

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