On February 28, 2023, Alberta and British Columbia both announced their 2023 provincial budgets. Each budget is the first tabled by a new Premier – Danielle Smith in Alberta and David Eby in British Columbia.
Presented by Travis Toews and Katrine Conroy, Finance Ministers for Alberta and British Columbia, respectively, both budgets tout massive investments in healthcare, with various measures to attract and train more frontline healthcare workers, reduce emergency room and surgical wait times, improve ambulance response times, and enable better access to mental health support and addictions services.
Other common themes include increased funding for education and childcare, as well as measures to strengthen public safety, boost job creation, attract sustainable investment, create affordable housing, and address the rising cost of living.
However, the budgets are far from identical. The most glaring difference is Alberta’s projected surplus of $2.4 billion for 2023-24, which sits in sharp contrast to the $ 4.2 billion deficit planned in British Columbia.
Aided by a remarkable turnaround in the oil and gas sector and $18.4 billion in forecasted non-renewable resource revenue, the Alberta government has opted for a campaign-style budget with numerous spending and debt reduction initiatives in advance of the upcoming provincial election. The British Columbia government, on the other hand, has decided against any significant cuts to services and supports as the province continues its recovery in the face of global economic uncertainty, while moving forward with select clean energy and sustainable economic development initiatives.
Several interesting tax measures included in both budgets have been summarized below.
Alberta
Corporate Income Tax
Alberta’s corporate income tax rate – the lowest of any province in Canada – remains unchanged at 8%. However, the province indicated that it is moving forward with previously announced plans for a new tax credit to promote further investment in the agricultural manufacturing sector.
Investment Tax Credit for Agricultural Manufacturing
The government will introduce the Agri-Processing Investment Tax Credit for capital investments of $10 million or more made on or after February 7, 2023. This non-refundable tax credit will be calculated at a rate of 12% and may be carried forward for up to 10 years. Further details on eligible expenditures and the application process are expected to be released this spring.
Property Tax
Education Property Tax Requirement Freeze
The education portion of property tax typically represents less than 25% of a typical tax bill for a property owner. This rate is based on a combination of the aggregate assessed values for properties across the province and the requisite amount of education property tax revenue as determined by the government.
The province has announced that it will freeze the education property tax requirement for 2023-24 at the current level. Combined with an overall increase in equalized assessment values, this will result in education property tax rate reductions for 2023. The rate per $1,000 of equalized assessment for residential and farmland properties will fall to $2.56 from $2.65 and the non-residential property rate will decline to $3.76 from $3.90.
Note that the municipal portion of property tax rates is set independently by each municipality.
Fuel Tax
Gasoline and Diesel Fuel Tax Relief
The budget confirmed that Alberta’s fuel tax relief program, which suspended the collection of fuel taxes on gasoline and diesel, will end on July 1, 2023. Fuel tax rates will resume being set quarterly based on fluctuations in the average price of oil.
British Columbia
Provincial Sales Tax (PST)
Amendments to Online Marketplace Facilitator Rules
The province intends to introduce several changes to the rules regarding the collection of PST by online marketplace facilitators and the tax status of online marketplace services, effective July 1, 2023.
Under the proposed changes to rules introduced in last year’s budget, online marketplace services provided by online marketplace facilitators will be taxable where they facilitate supplies of non-taxable services. In addition, the rules to determine when an online marketplace service is taxable will be amended to align them with the federal place of supply rules in place for GST/HST purposes.
Other proposed technical changes involve:
- Online marketplace facilitator obligations to collect tax on commercial sales;
- The rules used to determine when an online marketplace facilitator is providing an online marketplace service; and
- Clarifications to the definitions of an “online marketplace facilitator”, “online marketplace seller”, and “online marketplace service”.
The province notes that these changes will not impact the tax status of items sold to consumers through online platforms. Further details on these amendments are expected to be released in the coming weeks.
Exemption for Automated External Defibrillators
Commencing March 1, 2023, automated external defibrillators (AEDs) will be exempt from PST. This exemption extends to kits containing AEDs, parts (including pads), and services for AEDs. Manual external defibrillators will continue to be taxable. This exemption is intended to encourage the supply of AEDs throughout the province.
Technical Amendments
The government noted that various other technical amendments will be made to the Provincial Sales Tax Act, including changes to clarify that the following are not included in the taxable purchase or lease price for PST purposes:
- GST on goods brought or sent into the province (effective April 1, 2013); and
- The federal luxury tax which applies to select aircraft, boats, and vehicles (effective September 1, 2022).
In addition, effective July 1, 2023, the definition of a “vapour product” will be adjusted to exclude heated tobacco products.
Carbon and Motor Fuel Tax
Carbon Tax Increase
Beginning on April 1, 2023, the province’s carbon tax rates will be aligned with the federal carbon pricing backstop. Accordingly, carbon tax rates will increase by $15 per tonne of carbon dioxide equivalent emissions each year until reaching $170 per tonne in 2030. The province has committed to reviewing the rates prior to 2026 to ensure it remains on target to attain its emissions reduction goals.
New Carbon Pricing System for Large Emitters
Commencing April 1, 2024, large emitters will be exempt from carbon tax and subject to a new output-based pricing system (OBPS). The OBPS will require large industrial emitters to pay for emissions exceeding performance-based limits. An option will also allow certain emitters that otherwise don’t meet the OBPS threshold to participate in the program.
Further information on the OBPS is expected to be released this spring, with federal government and affected industry consultations planned throughout 2023.
Carbon Tax Reduction for Qualifying Greenhouse Growers
The budget announced a point-of-sale carbon tax reduction for propane and natural gas purchased by qualifying commercial greenhouse growers for use in heating or generating carbon dioxide to improve crop production.
This point-of-sale reduction will be available to greenhouse growers of fruits, vegetables, bedding plants, nursery landscaping plants, ornamental plants, flowers, and tree seedlings, provided that gross revenues in respect of those activities were at least $20,000 in the previous 12 months and there is a reasonable expectation of meeting the same threshold over the next 12 months.
International Fuel Tax Agreement Refund Rate Increase
The government plans to increase the refund rates for International Fuel Tax Agreement (IFTA) licensees, effective April 1, 2023, to reflect planned carbon tax rate increases and ensure that the correct amount of tax is paid on fuel used in the province.
Corporate Income Tax
Interactive Digital Media Tax Credit
The province has announced that its existing interactive digital media tax credit will be extended for another five years to August 31, 2028.
Technical Amendments
The budget documents indicate that several technical amendments will be made to the Income Tax Act, including changes to:
- Allow corporations to claim labour expenditures incurred up to 120 days in advance of the pre-certification form submission date under the production services tax credit, effective July 1, 2020;
- Clarify the application of administrative provisions regarding the clean buildings tax credit, effective February 23, 2022;
- Modernize the wording of provisions regarding access to information held by other public entities; and
- Ensure provincial and federal income tax legislation remain aligned in various other areas.
Property Tax
Property Transfer Tax Exemption
The province intends to introduce an exemption from the additional 2% property transfer tax that applies to the residential property value in excess of $3 million for qualifying purchases of new purpose-built rental buildings, effective for transactions on or after January 1, 2024.
Qualifying buildings must be non-stratified and held as rental property on a monthly or longer basis for at least 10 years. In addition, the residential portion of the building must be exclusively for rental and contain at least four units.
Police Tax Increase
In this year’s budget, the government announced a modest increase to its police tax, a property tax levy used to help fund policing in rural areas with populations below 5,000, for the 2023 taxation year.
Speculation and Vacancy Tax Clarifications
The budget documents note that the Speculation and Vacancy Tax Act will be amended to clarify: the geographic areas to be used in determining the annual fair market rent for residential properties, which is used in applying the non-arm’s length tenancy exemption; and, effective November 27, 2018, who will be considered a corporate interest holder in certain receivership situations.
More Information
For information on new and extended government funding initiatives included in the 2023 British Columbia and Alberta budgets, please navigate to our Mentor Works website at the links below:
Alberta Budget: https://www.mentorworks.ca/blog/government-funding/alberta-2023-budget-securing-albertas-bright-future/
British Columbia Budget: https://www.mentorworks.ca/blog/government-funding/british-columbia-budget-2023/
Further details on these budgets may be found on the provincial government websites at:
Alberta: https://www.alberta.ca/budget.aspx
British Columbia: https://www.bcbudget.gov.bc.ca/2023/default.htm
To read key updates from Canada’s 2023 provincial budgets, please navigate to Key Changes | 2023 Canadian Federal and Provincial Budgets.
If you have any questions about how these proposed changes might impact your organization, please do not hesitate to contact the Ryan TaxDirect® line at 1.800.667.1600 or taxdirect@ryan.com.