News and Insights

Alberta Budget 2011

Tax Development Feb 25, 2011

Alberta’s Minister of Finance and Enterprise, Lloyd Snelgrove presented the province’s 2011-12 budget on February 24, 2011.  This budget, which promises that Albertans will be the beneficiaries of one of the most competitive tax systems in North America, contains no new taxes or increased rates for existing taxes. The only significant commodity tax change (in respect of fuel tax) is noted below.   

Commodity Tax Measures  

Fuel Taxes   

It was announced that the Tax Exempt Fuel Use (“TEFU”) rebate for licensed vehicles, including the Prescribed Rebate Off-road Percentages (“PROP”) would be eliminated as of midnight, February 24, 2011.  The TEFU program will not be completely abandoned as the marked fuel (tax excluded) element, the Alberta Farm Fuel Benefit and the Alberta Farm Fuel Distribution Allowance will all remain in place.  

The TEFU program was implemented in 1987 to exempt industries and municipalities from Alberta’s fuel tax, in situations where fuel was used for qualifying off-road purposes.  Leading to the elimination of the rebate was its high administration cost, excessive compliance requirements and abuse of the rebate.  However, there will still be a requirement to track the fuel consumed in eligible vehicles involved in eligible off-road activities.    

The removal of the TEFU and PROP rebate is estimated to reduce the government’s cost by $65 million in 2011-12.   This will be achieved by increases in fuel tax revenue, due mainly to the elimination of these rebates.  In addition, the revamped TEFU program will have features similar to other provinces and will focus on unlicensed vehicles, machinery and equipment.  

Income Tax  

The Alberta Budget 2011 was referred to as a “practical” budget, and did not include any changes to the provincial corporate income tax rate for general corporations, which currently is 10%, and did not introduce any new corporate income taxes.  

Further information on Alberta’s 2011 budget may be found on the province’s web site at: Alberta Budget 2011.