2019 Alberta Election Platform - Businesses Drive Cities that Thrive January 2019 - Calgary Chamber
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2019
Alberta
Election
Platform
Businesses Drive
Cities that Thrive
January 2019
calgarychamber.com #podiumofrecord
Executive summary
Vibrant Commerce, Vibrant Communities
Businesses drive cities that thrive Business friendly policies are 1. Create stability through fiscal
key to building community responsibility
Executive summary........................................................................................................................... 2 vibrancy
The Alberta government’s use of royalty revenue
Plastered along the sides of rink boards across has created fiscal policies that are not sustainable.
Introduction.......................................................................................................................................6
any local prairie hockey arena is clear evidence Successive governments failed to put forward
1. Creating stability through fiscal responsibility.........................................................................8 of the importance of commerce to community a long-term path towards fiscal stability. This
vibrancy. Whether it is big business sponsorship has resulted in multiple credit downgrades,
2. Drive productivity through regulatory and tax reform...........................................................12 in NHL arenas or small business support of a local accumulating debt and expensive debt servicing.
novice team, business is at the centre of healthy Rising debt and deficits lower investor confidence
Regulatory reform....................................................................................................................12
communities. and expose businesses and taxpayers to the risk
Tax reform................................................................................................................................15 governments will raise taxes to generate revenue.
We create jobs, pay taxes, invest in the province To stabilize the fiscal situation, the next provincial
3. Support growth through internal trade and access to markets.............................................. 18 and give back to our communities. As businesses government must lay-out a long-term fiscal action
prosper so do communities and households. Much plan for the province.
Internal trade........................................................................................................................... 18
of the reason this relationship between commerce
and community has worked especially well in Recommendations:
Market access..........................................................................................................................20
Alberta is because historically governments largely 1. Commit to the following principles to create
4. Increase certainty through good governance and accountability.......................................... 22 provided the conditions to enable business risks to stability and accountability in Alberta’s fiscal
be rewarded. management:
Rule of Law..............................................................................................................................22
a. Balance operating budgets
Consultations and stable policy environment........................................................................ 23 However, due to actions of successive governments,
business competitiveness has eroded, and investors b. Develop long-term budget plans
Climate change........................................................................................................................23 see Alberta as too risky. This must change. In c. Commit to annual spending growth limits
our 2019 Provincial Election Policy Platform, the
5. Prepare for the future by developing and retaining a skilled workforce................................ 26 Calgary Chamber has identified five key areas the d. Benchmark service delivery
next provincial government must address to build a e. Reduce reliance on resource revenues.
Skills gap..................................................................................................................................26
better business environment because businesses Instead use royalties to grow Alberta’s
Summary of recommendations.......................................................................................................28 drive cities that thrive. savings
Endnotes......................................................................................................................................... 30
2019 Alberta Election: 2019 Alberta Election:
1 Businesses Drive Cities that Thrive Businesses Drive Cities that Thrive 2
2. Drive productivity through Additionally, the inability to move major energy
projects to market has resulted in extreme measures
regulatory and tax reform from governments to nationalize midstream energy
The regulatory environment has become a challenge infrastructure and intervene in free markets. These
for businesses in Alberta. Inefficient regulations cause uncertainty and cost the Alberta government
impact Alberta businesses’ ability to get things done billions of dollars in expenditures and potential tax
and create employment. Alberta’s corporate income revenue.
tax rate is no longer among the most competitive
in Canada, and we are becoming less competitive Recommendations:
globally. Together, these issues are hurting Alberta’s 4. Take a leadership role and champion
investment climate. interprovincial free trade. This includes leading
by example to eliminate trade and labour
Recommendations: barriers within its control and working within
2. Implement “layered cost” economic impact the framework of the Canadian Free Trade
assessments on provincial policy initiatives which Agreement (CFTA) to increase trade and remove
also considers overlap, duplication and additional non-tariff barriers.
regulatory burden from all levels of government.
5. Continue to communicate the national
Recommendations: Recommendations:
As part of the regulatory review process the 9. Work with industry to identify and address skills
importance of Alberta’s resources while working 6. Respect the rule of law and honour contracts
government should also look to reduce the overall gaps that currently exist. This should include:
with the federal government to facilitate private that have been signed and increase business
regulatory burden by removing two regulations
development of export infrastructure that moves confidence in the process.
for every new one that is added on business. a. Eliminating unnecessary barriers to access
Alberta’s products to new and diverse markets. 7. Provide reasonable time for consultation before
and promote the availability of job training
3. Initiate a comprehensive review of Alberta’s implementing new policies, with appropriate
programs like the Canada-Alberta Job Grant
corporate tax system within the first year of implementation timeframes for businesses and
and the Summer Temporary Employment
forming government. This should include: 4. Increase certainty through good the marketplace to adjust.
Programs to help workers develop the
8. Ensure climate policy promotes business
a. Reducing the corporate tax rate. governance and accountability skills needed to increase productivity in the
competitiveness while also working to support
We have seen provincial governments create workforce.
b. Broadening and streamlining the Alberta innovative technologies and helping to achieve
uncertainty when they do not honour agreements or b. Facilitating accountable partnerships
Investor Tax Credit to include all sectors and our environmental objectives.
comply with contracts. We have also seen all levels between business and post-secondary
making it a permanent part of the tax code.
of government layer costs on business through institutions to ensure that we are teaching the
policy development and a lack of consultation when 5. Prepare for the future by right skills to the workforce of the future.
3. Support growth through internal considering legislative changes. If we want to attract developing and retaining a skilled
trade and access to markets
significant and long-term business investments, it is workforce
crucial for governments to make it clear to business
Policymakers must continue to promote that contracts and agreements will be followed. There is a mismatch between the skills being
international cooperation and seek new markets for Further, sound environmental policies must support obtained by our workforce and the skills needed by
Canadian businesses abroad. The next government business competitiveness and innovation. business. Alberta businesses are struggling to find
will have its greatest influence addressing the the right people, with the right skills, that they need
many barriers deterring trade at home. Along with to grow. Ironically, this is occurring at a time when
internal trade barriers, a lack of market access Calgary’s unemployment rate is among the highest
across many sectors has limited Alberta businesses in Canada. There are also barriers limiting Alberta’s
from getting their products to foreign markets. ability to develop and attract skilled workers, then
subsequently retain the talent once it has been
developed.
Executive Summary Executive Summary
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3 Businesses Drive Cities that Thrive Businesses Drive Cities that Thrive 4
Introduction Our frontier spirit has helped dreamers,
scientists and entrepreneurs build an economy
on a winning formula of ingenuity, hard work,
Business friendly policies are key to self-reliance, independence and dogged persistence
building community vibrancy to solve any challenge in our way. Whether it
was settlers who worked the hard soil and battled
Plastered along the side of rink boards across
the elements to build a world-class agriculture
any local prairie hockey arena is clear evidence
industry or the technology and innovation that went
of the importance of commerce to community
into turning sand into the third largest oil reserves
vibrancy. Whether it is big business sponsorship
in the world, Alberta risk takers have always
in NHL arenas or small business support of a local
defied the odds.
novice team, business is at the centre of healthy
communities.
The formula worked well because governments
largely provided the conditions to enable business
We create jobs, pay taxes, invest in the province
success. We were a stable place to invest because
and give back to our communities. As businesses
of strong provincial finances, low taxes and
prosper so do communities and households. Much
a reliable regulatory system. The revenue
of the reason this relationship between commerce
generated by healthy businesses helped pay
and community has worked especially well in
for the schools, health care, and infrastructure
this province is because Alberta has always
to attract talent. We enjoyed a competitive
encouraged and rewarded business risk.
advantage for investors because of reputable public
institutions and a stable legal system to enforce the
“Much of the reason this relationship rule of law.
between commerce and community has
worked especially well in this
province is because Alberta has always
encouraged and rewarded business risk.”
2019 Alberta Election: 2019 Alberta Election:
5 Businesses Drive Cities that Thrive Businesses Drive Cities that Thrive 6
1
Creating stability through
fiscal responsibility
Alberta’s access to and reliance on revenue from “Furthermore, successive governments
royalties has created fiscal policies that are not
have not put forward a long-term path
sustainable. Excessive spending during high
growth periods have set expectations that are towards fiscal stability that can weather
not sustainable when the Alberta economy is not the resource royalty rollercoaster.”
globally competitive. The debt government is taking
on also risks creating a household debt burden This has resulted in multiple credit downgrades,
Due to the actions of successive governments, many We have also seen policy changes that occurred for families robbed of opportunities and jobs accumulating debt and expensive debt servicing.
advantages Alberta businesses and communities without meaningful business consultation having that disappear when economic conditions don’t As a result, billions of dollars that could go into
have come to appreciate have been eroded. A lack of unintended consequences and are layering growing foster business competitiveness. If continued, our savings for future generations or into community
long-term fiscal management has resulted in credit costs on business. Taken together, these have all ability to save for the future and sustainably fund vibrancy are instead going just to pay interest on
downgrades, diminished provincial savings, and reduced the certainty and confidence among the the social programs and community initiatives growing debt. To stabilize the fiscal situation and
led to uncertainty over future tax increases and new business community to take risks. that households rely on for their wellbeing will be prevent future downgrades, the next provincial
tax measures. Meanwhile, other jurisdictions are compromised by the burden of rocketing interest government must lay-out a long-term fiscal plan for
improving their tax competitiveness and putting our To grow Alberta’s economy, we need the next payments on a rapidly-increasing debt load. the province. In this plan the government should
ability to attract investment, business and skilled provincial government to build a better business look to address areas where services aren’t being
people at risk. environment. Our platform identifies five areas the Total government spending is forecasted to rise delivered efficiently by benchmarking Alberta with
government must address to build a better business above inflation plus population growth in upcoming other provinces in Canada.
environment because businesses drive cities years. According to Budget 2018, spending will rise
“Due to the actions of successive
that thrive. at a rate of 3.7% per year between 2015 and 2019.1
governments, many advantages Had spending increased in line with inflation plus “As a result, billions of dollars that could
Alberta businesses and communities population growth from 2015 onwards, Alberta go into savings for future generations or
have come to appreciate have would be spending roughly $2 billion less by the into community vibrancy are instead going
been eroded.” end of 2019, and the deficit that year would be 30% just to pay interest on growing debt.”
smaller.2
A lack of market access is costing tens of millions By following the five principles of fiscal
Furthermore, successive governments have not put
a day because we cannot get access to global prices responsibility that the Chamber has laid out,
forward a long-term path towards fiscal stability
for our products. We are seeing changes in the the Alberta Government can demonstrate stable
that can weather the resource royalty rollercoaster.
regulatory environment that are putting the future fiscal management conducive for business and
of major projects being built in our province at risk. investment growth. We can no longer spend our way
Increasing policy costs from all levels of government to economic stability. Investor confidence must be
are also putting the future of our small businesses restored to enhance global competitiveness.
in jeopardy.
Introduction
2019 Alberta Election: 2019 Alberta Election:
7 Businesses Drive Cities that Thrive Businesses Drive Cities that Thrive 8
Five Principles of fiscal Limitation on annual spending Other jurisdictions, such as British Columbia have Benchmark service delivery
been successful in reducing spending and staying
responsibilty growth within these limits by enacting Tax and Expenditure Despite some of the highest levels of operational
Between 2004 and 2015, Alberta’s program Limitations (TELs), which place legislative limits on spending in Canada, Albertans do not see the
Balanced operating budgets spending increased by an average rate of 7.2% government spending growth. Enacting TELs would highest performance results in critical areas of
per year,5 nearly twice the combined rate of be a good first step in showing Albertans that their public service delivery, including education and
Balancing the budget should be a top priority
inflation plus population growth. During this government is committed to fiscal responsibility, health care. In fact, Alberta spends $3,175 per
for the government. A balanced budget signals
period, program spending in Alberta doubled, supports competitiveness, and offers a stable person more than the average per person spending
that the province is a stable place for investment,
growing from $24 billion to $48 billion. In investment environment.10 of comparable provinces. If Alberta were to develop
as continued deficits add to the uncertainty
contrast, had program spending been increased a plan to benchmark per person spending to levels
about future tax increases to service and repay
in line with inflation plus population growth over to just half closer to the average of Canada’s largest
government debt. Balanced operating budgets must Limitations on spending will also provide larger
this period, spending would have amounted to $39 provinces, the Alberta Government would save $6.6
be a requirement with limited allowances for deficits incentives for departments to critically review where
billion in 2015, $9 billion less than actual spending.6 billion annually.12
to finance defined capital expenditures. they decide to spend money and allocate resources
more efficiently, as any spending increase on any
While the current Alberta Government inherited one program will limit the amount of available funds The OECD’s Programme for International
a difficult fiscal situation, they have continued the Student Assessment Study (PISA) identifies that
Long-term budget planning to spend on other programs.
Alberta spends more on education than any
trend of greater spending. Between 2015 and 2018,
One of the most significant issues facing Alberta operating spending in Alberta has increased by other province, yet students are behind in the
Addressing spending growth by finding efficiencies
is our lack of long-term reporting on our public roughly 15%.7 areas of math, reading and science. The math
in public service delivery is a significant concern for
finances. Without a long-term-outlook, a skills of Alberta’s students declined significantly
Calgary’s business community. In fact, spending
government cannot show whether decisions made over the same 10-year period13 that per-capita
Total government spending is also forecasted to rise cuts and savings in public service delivery was
today are likely to be sustainable in the long run. education expenditures rose by over 30 per cent
above inflation plus population growth in upcoming indicated in the Chamber’s Spring 2018 Business
This requires Albertans to accept on faith that (2003- 2012).14 Similarly, in health care, we trail
years. According to Budget 2018, spending will rise Leader Market Perceptions survey as the second-
we can carry on borrowing indefinitely, or that many of our provincial counterparts on important
at a rate of 3.7% per year between 2015 and 2019.8 best way government can better support business –
government has an acceptable plan to increase metrics of service delivery, treatment, and
This surpasses the 3.0% inflation plus population falling just behind reducing corporate income taxes.
revenues or reduce expenses.3 A 2018 Auditor wellness outcomes including overall health system
growth projected over this same period.9 And as illustrated in Table 1, Alberta can achieve
General of Alberta report found that no government resources and the perceived quality of primary
large cost-savings without removing necessary
in Alberta has reported about Alberta’s financial care, despite spending more per patient.
public services by bringing spending levels in line
condition in the long-term, and that in every year “While the current Alberta Government with other comparable provinces.
since 1981 the province would have run a deficit if The province should define our competitive peer
inherited a difficult fiscal situation, they
oil and gas revenues were excluded.4 groups and establish funding associated with
have continued the trend of greater
comparable peer funding to achieve specific
spending. Between 2015 and 2018, Table 1: Per person spending by Canada’s
In recent years, the lack of long-term planning has target outcomes. Alberta should allocate future
resulted in multiple credit downgrades. This has operating spending in Alberta has largest provinces11 funding in accordance with progress against a
made it more expensive to service the provincial increased by roughly 15%.” Alberta BC Ontario Quebec defined plan to achieve specific, measurable
debt, and has reduced certainty for business 2017 $12,409 $9,887 $9,163 $8,651 performance outcomes in defined areas of public
investment. Turning the current budget around service delivery. The Chamber believes that a more
To ensure necessary services can continue to 2018 $12,555 $9,856 $9,254 $8,872
while dealing with an ageing population, increasing performance-driven compensation structure for
be provided, while guarding against inefficient 2019 $12,580 $9,893 $9,390 N/A
debt levels, and continued volatile resource public-sector employees should be a tactic that
program delivery and greater debt, the Alberta
royalties, will take time. However, it is crucial that is considered to accelerate the achievement of
government must make a long-term commitment
the provincial government provide a long-term plan this goal.
to limit spending increases below the combined
so that Albertans can be given an understanding of
rates of inflation plus population growth.
the state of our public finances.
1 1
Creating stability through Creating stability through
fiscal responsibility fiscal responsibility
2019 Alberta Election: 2019 Alberta Election:
9 Businesses Drive Cities that Thrive Businesses Drive Cities that Thrive 10
2
Drive productivity through
Required activities that are funded by the provincial As part of a commitment to reduce reliance on oil
government should perform in accordance with and gas royalties, and invest in future generations
regulatory and tax reform
established benchmarks, ones that are comparable of Albertans, the next provincial government needs
and easily measured against competitive to put forward a plan to limit transfers from the
jurisdictions. Alberta should neither over nor under- Heritage Fund to the General Revenue Fund to
spend to achieve comparable results to its peer cover operating expenses and begin assigning a
jurisdictions. portion of annual energy royalties back to the Fund.
Healthy businesses create bustling communities In 2018, Alberta companies are dealing with the
Reduce budgetary reliance on
Recommendation 1: and households. Families enjoy going to the local introduction of carbon pricing, methane and clean
non-renewable resource revenue, ice cream shop or out for a nice dinner at a local fuels standards, minimum wage increses, costly
instead use royalties to grow restaurant, and many enjoy meeting up with friends changes to labour laws, the phase out of coal-fired
Alberta’s savings Commit to the following principles to create stability at the local pub. These are all experiences that generation, a limit on oil sands emissions, along
and accountability in Alberta’s fiscal management: are created by local businesses. Historically there with delays and uncertain approval timelines for
Alberta is unique among its peers in that we require
a. Balance operating budgets has been no shortage of entrepreneurs looking to major projects and pipelines.
a conversation about savings accounts when
b. Develop long-term budget plans start and grow businesses that build communities,
discussing fiscal responsibility.
c. Commit to annual spending growth limits however in recent years we have unfortunately seen One specific issue area hampering the development
d. Benchmark service delivery businesses closing their doors because they can’t of large hydrocarbon projects is the cost associated
Most Alberta governments have talked about getting weather the growing regulatory and tax burden that
e. Reduce reliance on resource revenues, instead with preparing an application and gaining approval
off the “energy roller coaster” that has ruled the has been layered upon them. This creates holes in
use royalties to grow Alberta’s savings with the Alberta Energy Regulator. According to a
budgeting process in the province. However, very communities, not just in a physical sense from empty WorleyParsons survey, the costs associated with the
few have taken meaningful steps to achieve this storefronts, but also through experiences that families application and approval process is $2 million or
objective. A good first step in this process would be a miss out on. It is imperative that the next provincial more in Alberta. In comparative jurisdictions such
commitment to transfer a portion of energy royalties government improve the business environment as Norway, the UK, and North Dakota these costs
to the Heritage Fund. so that those businesses can, in turn, help build can be as much as $1.6 million lower.17
communities across Alberta.
The Heritage Fund is Alberta’s main long-term
The regulatory issues facing Alberta businesses
savings fund; no other province has such a fund.
The fund was established in 1976 to collect a portion Regulatory reform are not limited to the energy sector. The time
required to construct infrastructure, build new
of Alberta’s non-renewable resource revenue for The regulatory environment has become a challenge facilities, and expand production and grow sites
future generations. Currently the Heritage Fund is for many businesses in Alberta. Canada’s regulatory have all increased. According to an OECD survey
required to retain a portion of the savings to guard system impacts Alberta businesses’ ability to of 190 countries, Canada ranks 54th in dealing
against inflation, with the remaining income being get things done. While Canada’s overall ranking with construction permits and 46th in trade across
transferred to the Alberta Government’s General in the World Economic Forum’s 2018 Global borders.18 Increasing regulatory burdens, concerns
Revenue Fund. In 2017-18, the Heritage Fund Competitiveness report is a respectable 12th of 140 over regulatory duplication, and uncertainty around
earned $1.79 billion in net income, $230 million countries, Canada has room for improvement in the environmental regulations are also areas that have
of which was retained in the Fund for inflation sub-ranking of burden from government regulation, been identified as being a deterrent to investment.
proofing and $1.56 billion was transferred to the ranking 53rd.15 Reports from the OECD show similar Between 2015 and 2016, the province saw drops in
General Revenue Fund. concerns. According to a survey of global business investment in accommodation and food services,
leaders, the single most problematic factor for doing manufacturing, oil and gas services and oil and gas
business in Canada is “inefficient bureaucracy.”16 extraction.19
1
Creating stability through
fiscal responsibility
2019 Alberta Election: 2019 Alberta Election:
11 Businesses Drive Cities that Thrive Businesses Drive Cities that Thrive 12
“Between 2015 and 2016 the Looking at B.C. we can see that between 1994 and At the provincial level, Alberta businesses are to 50 policy and regulatory initiatives currently
2001 (prior to their regulatory reform initiative) facing many changes that will increase the cost being considered by the federal and provincial
province saw drops in investment in economic growth was 1.9% below the Canadian of labour. Alberta’s minimum wage has gone up governments that could undermine investor
accommodation and food services, average. Following the regulatory reform 47% in just three years. Compared to 2016, the confidence in Canada’s energy sector.
manufacturing, oil and gas services and initiative in 2001, economic growth in B.C. was median cost increase that an impacted Calgary
oil and gas extraction.” 1.1% above the Canadian average between 2002
restaurant and hospitality business surveyed in
and 2006. Similarly, B.C.’s real GDP growth was
Chamber’s layered cost assessment will face due to Recommendation 2:
lower than Canada’s in six of nine years between
Alberta businesses have also seen increasing the minimum wage is $51,720.
1992 and 2000 but grew faster than Canada’s
regulatory burdens from recent labour reforms. every year between 2002 and 2008.21 While there
Recently, the Alberta Government has made are likely a variety of factors that contributed Alberta businesses will also be impacted by the Implement “layered cost” economic impact
changes to the employment standards and labour to the economic changes in B.C., a dedicated province’s newly legislated Bill 17: The Fair and assessments on provincial policy initiatives which
relations code, the rules governing occupational focus on improving the regulatory system clearly Family-friendly Workplaces Act, which changed also considers overlap, duplication and additional
health and safety, along with workers compensation. played a part. the Employment Standards and Labour Relations regulatory burden from all levels of government.
Taken together, these changes have increased Code. Taken together, these rules govern most of the As part of the regulatory review process the
financial costs for business, added administrative employer-employee relationship. government should also look to reduce the overall
burdens – especially on small businesses – and Layered costs of government policies regulatory burden by removing two regulations for
were implemented without adequate business The issue with the changes to the Employment every new one that is added on business.
Over the past several years government policies
consultation and input. have been making it harder for business to Standards Code (ESC) and the Labour Relations
succeed. This is a problem that all levels of Code (LRC) is not only that they will increase costs
We have seen other governments in Canada government need to address. It is crucial that as for business, but also the lack of consultation with
undertake regulatory reform to reduce the burden the next provincial government develops policy, the business community as they were developed. In
on business and help foster economic growth. In they not only consider the impact that policy Ontario, the government spent two years reviewing
2017, Manitoba brought in legislation requiring changes at the provincial level will have, but also their workplace legislation. In Alberta, there was a
one regulation to be removed for every new one the cumulative effect changes from the federal 36-day consultation period.
that is added on business. They then added a and municipal governments will have as well.
stronger two for one version of this policy until Alberta businesses are also facing greater costs
2021. In addition, the legislation requires that the In recent years a myriad of policies, from all three from energy regulations. The carbon levy is one of
effectiveness of regulations be evaluated within levels of government, have layered costs on the
these policies that are increasing costs for business.
three years after their coming into force.20 In business community. By making it harder to run
The median cost increase for impacted restaurants
2001, the B.C. government committed to reducing a business this “layered cost impact” is resulting
and hospitality businesses surveyed in the Calgary
in fewer job opportunities, higher prices,
one-third of the regulatory burden in just three Chamber’s layered cost assessment due to the
and is discouraging investment. It is reducing the
years. This commitment was surpassed in 2004 carbon levy in 2018 is $36,408.
ability of current businesses to expand and new
with a reduction of over 40%. In 2004, the B.C.
businesses to start-up. By making it harder to
Government also introduced a regulatory cap,
run a business, especially during tough economic The layering of regulatory costs has been a key
“Net Zero Increase” commitment, to ensure the times, these costs have contributed to the factor that has deterred large capital investments,
regulatory burden does not increase. permanent closing of Alberta businesses. especially in Alberta’s energy sector. There are up
When looking at the process of how to achieve
regulatory reform, it is also important to understand
“...this “layered cost impact” is resulting
the benefits of an efficient regulatory system. in fewer job opportunities, higher prices,
and is discouraging investment.”
2 2
Drive productivity through Drive productivity through
regulatory and tax reform regulatory and tax reform
2019 Alberta Election: 2019 Alberta Election:
13 Businesses Drive Cities that Thrive Businesses Drive Cities that Thrive 14
Tax reform With pro-business reforms being made in the U.S. Higher tax burdens on business not only slow the significantly limited in the type of investments that
and around the world, it is crucial for the next pace of economic investment and wage growth, they are eligible for the tax credit, and is only funded
Alberta’s tax advantage has been declining in recent provincial government to ensure that reforming can have negative impacts on the necessary public until 2022. Expanding the scope to all sectors and
years. Alberta’s business tax system is a top priority. services Albertans demand. Estimates suggest making the AITC a permanent part of the tax code in
Making our tax system more competitive will that for Canada as a whole, a one percentage point Alberta would be a significant way the Government
As Figure 1 shows below, Alberta’s corporate income encourage economic and business activity, improve increase in the provincial corporate income tax can reduce tax burdens and encourage investment.
tax rate is no longer among the most competitive in lagging business investment, foster competitiveness, rate results in a reduction in the business tax base The Chamber has also heard that applying for the
Canada, or among energy producing U.S. states. Not and increase the tax base. by 3.67% in the short term, and 13.60% over the program can be complex and we suggest the next
only has our competitive advantage been impacted longer term. This suggests that a jurisdiction’s provincial government streamline the application
by tax decisions made at the provincial and state business tax burden can impact tax revenues, with process.
Taxes have a large effect on the overall level of
levels in North America, it is also impacted by slight increases in the corporate tax rate resulting in
business and economic activity. A Canadian federal
national-level tax reforms made around the world. reductions in the tax base.27
department of finance study analyzed tax cuts
Figure 1: Corporate Income Taxes in between 2000 and 2004, finding that each 10% Capital Investment Tax Credit (CITC)
reduction in the after-tax cost of capital lead to a 7%
Canada and U.S. Energy States increase in the amount of capital.23
“Higher tax burdens on business not only The Alberta government has also introduced
slow the pace of economic investment the Capital Investment Tax Credit (CITC) which
Nova Scotia provides a tax credit on 10% of eligible capital
Like overall economic activity, an uncompetitive tax and wage growth, they can have
PEI expenditures, up to $5 million. Like the current
Alaska
system discourages business investment, whereas negative impacts on the necessary public AITC, the CITC is only eligible for certain business
Newfoundland
having a competitive tax system is one of the main services Albertans demand.” sectors – manufacturing, processing, and tourism
factors that attracts investment. In 2017, non- infrastructure – and is applied on the purchase of
Lousiana
residential capital investment in Alberta fell by 6%, machinery, equipment, and buildings. The program
New Brunswick Reducing the general corporate income tax rate
with spending on machinery and equipment falling guidelines specifically outline ineligible activities
Alberta would be a good first step to improving Alberta’s tax
nearly 10%. including farming, construction, petroleum and
BC competitiveness. The next Alberta Government also
natural gas extraction, energy generation, along
Manitoba has other policy options to further reduce business
Wage and productivity growth are other positive with others.29 By removing the ineligible business
Oklahoma
outcomes that can be achieved by improving tax burdens and ignite the province’s businesses
activity guidelines, while keeping other program
Saskatchewan
Alberta’s global tax competitiveness. While there is competitiveness.
requirements in tact, the Alberta government
Quebec a perception that business taxes are paid exclusively can significantly reduce tax burdens on capital
Ontario by corporations and shareholders, onerous business investments and allow market forces to encourage
Colorado taxes also harm employees. Estimates suggest that Alberta Investor Tax Credit (AITC) business decisions.
North Dakota workers bear between 30% and 35% of the burden One of the mechanisms the government can use to
Alberta 2014 of corporate income tax increases.24 lower tax burdens is the Alberta Investor Tax Credit
Texas (AITC). With help from the Calgary Chamber, the Recommendation 3:
Wyoming Between 1981 and 2014, for each additional dollar Alberta Government introduced the AITC in 2016 to
0% 5% 10% 15% 20% 25% 30% 35% of tax revenue brought by an increase in provincial help smaller Alberta businesses access capital. The
Combined Provicial/State and Federal CIT corporate tax rates, wages were reduced between AITC is a 30% tax credit to investors who provide Initiate a comprehensive review of Alberta’s
$1.52 and $3.85.25 When the federal government capital to Alberta small businesses (no more than corporate tax system within the first year of forming
Sources: Tax Foundation, “State Corporate Income Tax reduced their corporate income tax rate from 28% 100 employees) doing research, development or government, this should include:
Rates and Brackets For 201822; PwC, “Tax Facts and to 12%, wages increased faster than they had in the commercialization of new technology, are within a. Reducing the corporate tax rate.
Figures Canada 2018”. previous decade, and faster than wages in other the tourism sector, or are in new digital media b. Broadening and streamlining the Alberta
industrialized countries.26 development.28 While, the AITC has helped reduce Investor Tax Credit to include all sectors and
the tax burden on business investments, it is making it a permanent part of the tax code.
2 2
Drive productivity through Drive productivity through
regulatory and tax reform regulatory and tax reform
2019 Alberta Election: 2019 Alberta Election:
15 Businesses Drive Cities that Thrive Businesses Drive Cities that Thrive 163
Support growth through internal
trade and access to markets
Trade within Canada and access to international Internal trade
markets are crucial to business growth. But it
goes beyond simply wanting to grow a business in As a city with a relatively small market, many
Alberta. Decisions made by Canadian governments businesses must sell outside of Calgary and Alberta
to create barriers to internal trade are estimated to be successful.
to be costing every household across the country
$7,500 per year.30 Given our reliance on external markets, there is no
wonder that calls for protectionism across the globe
are becoming very concerning. While policymakers
“Decisions made by Canadian should continue to promote international
governments to create barriers to internal cooperation and seek new markets for Canadian
trade are estimated to be costing every businesses abroad, international trade issues often
household across the country lie outside Alberta’s influence.
$7,500 per year.”
We can, however, address the many barriers
deterring trade at home. While the Canadian
For a family that could be a couple months worth Constitution prohibits provinces from imposing
of mortgage payments or helping children out tariffs on goods sold within Canada,31 provinces
with tuition. Sadly this cost is a direct result of have been able to implement regulations that
governments across Canada choosing to make it significantly increase the cost of internal trade.
harder to do business. Unfortunately, it doesn’t stop In fact, economists suggest that an open and free
there. In Alberta our inability to get our products to Canadian market would benefit Canadians by up to
market has resulted in the loss of tens of thousands $130 billion per year.
of jobs. For families that have been impacted this
can mean cutting back on activities for children, Unfortunately, in 2018 we saw a Supreme Court
or worse losing the family home. Compounded, of Canada (SCC) decision that granted provincial
these two issues have had a dramatic impact on governments significant leeway to restrict trade
households in Alberta in recent years. within Canada in the “Comeau Case.” Under
the SCC decision, a provincial government can
avoid violating section 121 of the Constitution by
“In Alberta our inability to get our products illustrating that their law is “rationally connected”
to market has resulted in the loss of tens of to some other purpose, such as protecting public
thousands of jobs.” health or the environment.
2019 Alberta Election: 2019 Alberta Election:
17 Businesses Drive Cities that Thrive Businesses Drive Cities that Thrive 18As we saw in the “Comeau Case” rules around These were the same provisions in the last One of the barriers that limit a business’ ability to to the United States. Making Canada’s personal
transporting alcohol across provincial borders are agreement, the Agreement on Internal Trade (AIT), attract talent from across Canada is compulsory income tax more competitive would decrease
excellent examples of the types of non-tariff barriers that allowed provincial governments to erect the provincial certification for tradespeople. Alberta this outward flow to the U.S. while increasing
that exist in Canada. With strict limits imposed on current regulatory barriers. While the AIT had limits currently requires compulsory certification in interprovincial migration – a benefit to provinces
alcohol transportation across the country, the SCC in scope (it did not apply to all industries), it was more professions than other provinces, apart that demand high skill labour.35
decision appears to make it easy for governments the public interest provisions that led to its inability from Quebec. The national average of regulated
to restrict internal trade by simply offering another to liberalize trade in Canada. Even in the industries occupations (excluding Quebec and Alberta) is
reason for creating a barrier. While this decision that the AIT specifically covered, such as the alcohol 13.1%. This is substantially lower than the amount Recommendation 4:
was disappointing for businesses in Calgary, what industry, internal trade barriers are still widespread. of regulated occupations in Alberta, which is
was even more disheartening was that the Alberta 38.8%.33 Provincial requirements over compulsory
government, along with seven other provinces certification increases the cost for Canadians who Take a leadership role and champion interprovincial
and the federal government, intervened against Labour mobility wish to move to Alberta who may be certified free trade, this includes leading by example to
the removal of Canada’s liquor restrictions in the under another province and increases the cost for
Labour mobility between provinces is hampered eliminate trade and labour barriers within its
“Comeau Case.” businesses to hire needed skills that are currently
by government regulation. The inability of some control and working within the framework of the
outside of Alberta. Canadian Free Trade Agreement to increase trade
workers to easily move across provinces not only
limits their jobs prospects and economic security, within Canada.
Canadian Free Trade Agreement but also makes it harder for businesses to acquire Other jurisdictions have embraced reducing the
amount of compulsory certification in their labour
Despite the setback that was dealt to removing the skills they need. This results in job vacancies in
markets. British Columbia does not require any
Market Access
internal trade barriers by the SCC decision on the areas that need workers, and higher unemployment
“Comeau Case”, there is a Canadian Free Trade in areas willing to supply that labour. compulsory certifications, while Ontario, Manitoba, Along with barriers inhibiting access to markets
Agreement (CFTA) in place that was signed on July Saskatchewan, New Brunswick, Newfoundland within Canada, regulatory barriers have limited
1, 2017, by the federal and provincial governments. & Labrador, and Prince Edward Island require Alberta businesses from getting their products
While offering the highest average hourly wage for
The agreement provides a channel for Canadian certification for less than 17% of occupations.34 to foreign markets. Additionally, the inability
vacant positions, Alberta is still tied for the third
governments to work together and reduce barriers, to move major projects to market has resulted
highest job vacancy rate among the provinces.
despite the court’s decision that some trade barriers Increasing tax burdens and higher costs of living in extreme measures from governments to
Each of the more than 50,000 vacant jobs in the
within Canada are constitutional. also discourages talented labour from staying nationalize midstream energy infrastructure such
province represent businesses that are currently
in or moving to Alberta. In fact, we have heard as government purchases of a pipeline and the
unable to reach their potential.32 Couple Alberta’s
from Calgary businesses that the sole issue is not planned purchase of oil rail cars. It has also caused
While very little red tape has been cut, provinces high vacancy rate with the high unemployment
just developing the right skills, but difficulties in the Alberta government to intervene in the free
have made significant commitments to work rate and there is reason to believe that much of the
retaining the right skills once we develop them. market by curtailing oil production to help drive
with each other on regulatory harmonization. vacancy is due to not being able to find the right
prices up. These measures not only drive investment
A committee – Regulatory Reconciliation and talent close to home. Identifying and addressing the
uncertainty, but cause billions of taxpayer dollars
Co-operation Table – has been established to barriers limiting interprovincial mobility could help Personal income taxes are one of the tools a
to be spent in areas that are in the domain of the
recommend to governments where red tape should businesses acquire the talent they need to grow. government has at their disposal that can encourage
private sector. It is especially worrisome that
be removed, and regulations harmonized. or discourage talented labour from staying in
these crown expenditures come at a time when
Alberta. Like corporate taxes, as personal income
“Couple Alberta’s high vacancy rate with taxes increase, people are less likely to either stay
governments are deeply in debt.
However, the recommendations are just that
– recommendations. Governments can opt out the high unemployment rate and there in the jurisdiction, or businesses must pay more to
from these recommendations if they decide that is reason to believe that much of the compensate for the higher taxes. In fact, a report by
“reconciliation is not a desirable option for their vacancy is due to not being able to find the Canadian Labour Market and Skills Research
jurisdiction.” Network found that reducing personal tax burdens
the right talent close to home.”
in Canada reduced the migration of upper end talent
3 3
Support growth through internal Support growth through internal
trade and access to markets trade and access to markets
2019 Alberta Election: 2019 Alberta Election:
19 Businesses Drive Cities that Thrive Businesses Drive Cities that Thrive 204
Increase certainty through good
governance and accountability
As Canadians we have a fundamental understanding Despite Trans Mountain receiving National Energy
of fairness. In households across Alberta it is a Board (NEB) approval for the project, the B.C.
key value that parents pass down to children. As a government used every tool in its toolbox to stop
result, we don’t like to see governments acting in the project. This opposition included proposing
ways that aren’t fair. Not abiding by or changing the new rules that would limit the transportation of
rules at the last second wouldn’t be fair in any sport diluted bitumen while the province determined their
that we played growing up, and it also isn’t fair when ability to adequately mitigate spills. While B.C. has
governments do it to business. The next provincial referred their proposal to the courts, it has widely
Oil price differential The inability to build these pipeline projects has led
government must ensure that they change and been viewed as unconstitutional. Even though this
to a situation where Alberta was producing 250,000
Oil sold from Alberta continues to be sold at a barrels a day more than could be shipped using implement policy that minimizes political risk and proposal is likely illegal, the signal that was sent by
substantial discount to world prices. In late 2018 existing pipeline and rail capacity, resulting in the creates business certainty. If policies are changed, B.C.’s actions resulted in Kinder Morgan deeming
this differential reached record levels at times significant discount that Alberta was facing. it is vital that they are done so in way that is fair for the project unfeasible due to the political risk
surpassing a discount of $50 per barrel. This is businesses. In a globally competitive environment, beyond their control. All this despite already having
resulting in substantially lower royalties for Alberta Calgary businesses should not be subject to spent roughly $1 billion moving the project through
While this uncertainty around pipelines has
and significant economic losses for Canada. With unnecessary roadblocks and political risk from their the regulatory process.
significant consequences on the energy industry,
storage and export capacity completely full, the own governments.
it also impacts other sectors ability to transport
government of Alberta had indicated that the record B.C.’s opposition contributed strongly to the federal
their products by rail. With increasing rail capacity
setting differential cost the Canadian economy up to government’s decision to step in and purchase
$80 million a day.
being used to transport oil, the ripple effect makes
Rule of Law the existing pipeline for $4.5 billion. While the
it harder for other sectors to get their products to
export markets on rail. Respect for the rule of law is vital for business continuation of the Trans Mountain expansion is
confidence. Upholding this democratic principle positive for business, this circumstance illustrates
Uncertainty around infrastructure will provide certainty for the business community. the need for governments to respect the rule of law
projects Recommendation 5: Recently in Canada we have seen provincial and begin working to improve investor confidence.
governments in BC, Ontario, and Alberta create
The lack of pipeline capacity is not a new issue.
uncertainty when they do not honour agreements or An Alberta example is the PPAs lawsuits that were
Businesses made investment decisions to increase
Continue to communicate the national importance comply with contracts related to pipelines, internal launched in 2016. These lawsuits were an attempt
production many years ago - with an expectation
of Alberta’s resources while working with the federal trade, green energy contracts, and power purchase to overturn contracts that had been signed in 2000
that there would be increased export capacity - with
government to facilitate private development of agreements (PPAs). between the companies that held them and the
several seemingly viable new transportation options
in various stages of the regulatory process. Pockets export infrastructure that moves Alberta’s products government of Alberta. By challenging contracts
of vocal opposition to these projects has resulted to new and diverse markets. “Respect for the rule of law is vital for that had been previously agreed to, the government
in political interference that have caused the delay, created significant uncertainty not only for the
business confidence...” companies named in the lawsuits, but also for any
cancellation or rejection of four major pipeline
projects. company signing an agreement with the Alberta
government in the future.
3
Support growth through internal
trade and access to markets
2019 Alberta Election: 2019 Alberta Election:
21 Businesses Drive Cities that Thrive Businesses Drive Cities that Thrive 22To build a stable policy environment in the province While this is clearly an important issue for Alberta, Another way to make a big difference is through
Recommendation 6: it is essential that the next provincial government it is also critical to put it in context. Canada exporting game-changing technology that enables
ensure they engage in meaningful consultation contributes 1.6% of global emissions. This number other jurisdictions to reduce their emissions. One
with the business community. Appropriate may be high on a per capita basis; however, it of the ways Alberta has done this is through the
Respect the rule of law and honour contracts that consultation and having business at the table for demonstrates that even with the most stringent establishment of a technology fund. This fund can
have been signed and increase business confidence the development of regulations will help identify climate change policies, there is very little impact support the development of innovative technologies
in the process. and address potential unintended consequences that our country or province can have on climate that, if commercialized, can help reduce emissions
and demonstrate the government’s support for the change if we act alone. in Alberta and can also be exported to other
business community. jurisdictions.
Consultations and stable Therefore, it is crucial that Alberta, and Canada look
policy environment Moving forward, the next Alberta Government can for opportunities where we can reduce emissions It is still important that Alberta continues to show
Calgary Chamber members have indicated that better reach social policy objectives while guarding not only at home, but also on a global scale. One way leadership and reduce emissions at home. While
rapid policy changes combined with inadequate against the unintended consequences outlined this can be achieved is through displacing higher Canada has seen different approaches to carbon
consultation or insincere consultation have created above through greater consultation with the emissions fuel sources like coal with cleaner and policy taken in different provinces, it is critical that
barriers to future business investment in Alberta. business community and implementing policies in a more responsibly produced Alberta energy in other whatever approach the next provincial government
business-friendly manner. parts of the word. decides to take promotes innovation and doesn’t
harm global business competitiveness. If these
“...rapid policy changes combined with Historic investments in liquified natural gas, principles are followed, Alberta can continue to
inadequate consultation or insincere Recommendation 7: will help to achieve this, however we need to reduce emissions while being an attractive place for
businesses to invest.
consultation have created barriers to future ensure that the Canadian business environment
enables producers to compete on a global scale.
business investment in Alberta.” Provide reasonable time for consultation before Oil companies continue to spend billions to
implementing new policies, with appropriate reduce emissions intensity and are committed to Recommendation 8:
implementation timeframes for businesses and the environmental conservation. This stands in stark
The province has been going through significant
marketplace to adjust. contrast to other oil producing jurisdictions who
policy changes at a pace that is difficult for
business to keep up with. By stabilizing the policy simply don’t live up to the environmental standards
Ensure future climate policy promotes business
environment, the next provincial government will be Climate change that Canadians value. If we can get Canadian energy
competitiveness while also working to support
able to provide more certainty for business and help products that are produced responsibly to world
There is no doubt that climate change is a critical innovative technologies and helping to achieve our
foster growth. markets, we can reduce global emissions on a much
issue that needs to be addressed. Alberta has long environmental objectives.
larger scale.
recognized the need to act to combat a changing
Businesses are looking to invest over the long-term, climate, which was demonstrated when in 2007
which means that even if government changes on Alberta became the first jurisdiction in North “...we need to ensure that the Canadian
four-year election cycles, the rules shouldn’t swing America to place a carbon levy on all large emitters business environment enables producers to
back and forth like a pendulum. This highlights the across all sectors.
importance of a long-term policy approach that will
compete on a global scale. ”
provide the certainty that businesses want prior to
making significant investments.
4 4
Increase certainty through good Increase certainty through good
governance and accountability governance and accountability
2019 Alberta Election: 2019 Alberta Election:
23 Businesses Drive Cities that Thrive Businesses Drive Cities that Thrive 24You can also read
