Alberta Budget Highlights

The Alberta Minister of Finance, Iris Evans, presented the 2008-09 provincial budget on April 22, 2008 at 3 p.m. The following is a summary of the highlights contained in the budget.

Highlights

• No income tax rate reductions or increases in indexed personal tax credits
• Elimination of health care premiums, effective January 1, 2009
• Introduction of new SR&ED tax credit, effective January 1, 2009
• Changes paralleling federal budget measures on CCA/TFSA
• Enhancement of Alberta Family Employment Tax Credit and caregivers/disability supplements

Economic context

• Revenue increase of 2.2% to $38.6 billion, and expenditures increase of 9.7% to $37 billion, for a surplus estimated at $1.6 billion in 2008-09.
• Tax measures will save individuals and businesses $1.3 billion in 2009.
• Economic growth expected to continue at 3% with the budget forecast based on $78/bbl.
• New royalty framework starts January 1, 2009, with royalty rates increasing from 30-35% to up to 50% and a revised rate cap at $120/bbl.
• Three-year capital expenditure plan increased by 21% to $22 billion.

Measures concerning businesses

• No changes in corporate tax rates or small business income thresholds.
• Introduction of a 10% credit on scientific research and experimental development (SR&ED) expenditures up to $4 million for a maximum credit of $400,000, refundable for all companies, for expenditures occurring after January 1,2009. It is estimated that the credit is worth $60 million annually.
• The government will introduce legislation to effectively increase the tax on income subject to the higher small business thresholds in Alberta compared to federal small business thresholds that are withdrawn under the enhanced dividend tax credit, from 3% to 10%.
• Effective January 1, 2009, businesses that pay health care premiums on behalf of their employees as part of a benefit package will benefit from the elimination of the premiums.
• Alberta will parallel the recent federal budget changes related to enhanced CCA claims.

Measures concerning individuals

• The elimination of the health care premiums, effective January 1, 2009, will benefit Albertan families by $1,056 each year, and by as much as $528 per year for single persons. The annual saving is estimated at $1 billion.
• Personal tax credits will be indexed in 2008 by 4.7%, which would, for example, increase the basic/spousal and eligible dependant credits from $15,435 to $16,161. In total, this will save $132 million in 2008.
• The Alberta Family Employment Tax Credit will be enhanced by $25 million, increasing the credit, depending on the number of children in the family, and increasing the phase-out income threshold to start at $32,633.
• The caregiver credit and infirm dependant credit will more than double, resulting in benefits of between $500 and $1,000 annually.
• Alberta will parallel the recent federal budget introduction of the tax-free savings account, which comes into effect in 2009, so that income earned in the account is not subject to Alberta tax.

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