Tax Me Home, Country Roads!
June 7, 2011 10:58 AM Subscribe
If Alberta had no oil, would a 5% provincial sales tax make up for the lost tax revenue?
(For the purposes of this question, please ignore completely the effect that the oil industry has on the economy in general)
(For the purposes of this question, please ignore completely the effect that the oil industry has on the economy in general)
Best answer: Yeah, not even close.
The forecast is for over $8 billion in non-renewable resource revenue this fiscal year, $10 billion next, $12 the year after that.
Total annual retail sales in Alberta are approximately $60 billion. Even assuming this entire amount was taxable, you do the math...
As a point of reference, total federal government revenue from the GST is "only" $30 billion.
posted by Urban Hermit at 12:10 PM on June 7, 2011
The forecast is for over $8 billion in non-renewable resource revenue this fiscal year, $10 billion next, $12 the year after that.
Total annual retail sales in Alberta are approximately $60 billion. Even assuming this entire amount was taxable, you do the math...
As a point of reference, total federal government revenue from the GST is "only" $30 billion.
posted by Urban Hermit at 12:10 PM on June 7, 2011
Best answer: Breaking the numbers down:
Alberta is expected to bring in $8 billion in "non-renewable resource revenue," i.e. royalties from oil, coal, bitumen, etc. leases in 2010-11. The economy of Alberta was about $247 billion last year, but a sales tax wouldn't apply to most of it. The Retail & Wholesale, Tourism & Consumer Services, Business & Commercial Services, and Transportation & Utilities sectors, combined, made up 31% of the provincial economy, or $76.57 billion.
The reason that we're only looking at that figure--and as Urban Hermit points out, actual retail sales were only about $60 billion annually--is that a huge chunk of the economy isn't retail sales. Energy is the single biggest sector--23.4%--and most of that is exported. No sales taxes on exports. Manufacturing doesn't get taxed until it represents a retail sale. Construction isn't generally taxed at all, nor is health care, education, public administration, financial products, or real estate. Or, at least, those things are subject to their own taxes, not sales tax.
Even saying that a sales tax would apply to every single transaction in that segment--and it wouldn't--you'd still only come up with $3.83 billion, less than half of what you'd need. Using the $60 billion figure, you're down to $3 billion. If the $60 billion figure is accurate, you'd need a 13.3% sales tax to make up for the loss in oil revenues.
posted by valkyryn at 12:14 PM on June 7, 2011
Alberta is expected to bring in $8 billion in "non-renewable resource revenue," i.e. royalties from oil, coal, bitumen, etc. leases in 2010-11. The economy of Alberta was about $247 billion last year, but a sales tax wouldn't apply to most of it. The Retail & Wholesale, Tourism & Consumer Services, Business & Commercial Services, and Transportation & Utilities sectors, combined, made up 31% of the provincial economy, or $76.57 billion.
The reason that we're only looking at that figure--and as Urban Hermit points out, actual retail sales were only about $60 billion annually--is that a huge chunk of the economy isn't retail sales. Energy is the single biggest sector--23.4%--and most of that is exported. No sales taxes on exports. Manufacturing doesn't get taxed until it represents a retail sale. Construction isn't generally taxed at all, nor is health care, education, public administration, financial products, or real estate. Or, at least, those things are subject to their own taxes, not sales tax.
Even saying that a sales tax would apply to every single transaction in that segment--and it wouldn't--you'd still only come up with $3.83 billion, less than half of what you'd need. Using the $60 billion figure, you're down to $3 billion. If the $60 billion figure is accurate, you'd need a 13.3% sales tax to make up for the loss in oil revenues.
posted by valkyryn at 12:14 PM on June 7, 2011
Of course, as you acknowledge in the question, framing it in this way really ignores the central issue. The energy sector has a huge impact on Alberta's personal and corporate income tax revenues as well. On the other side of the equation, it is a major driver of population growth and inflation, which have tremendous impacts on the demand for services/infrastructure and the cost of meeting those demands (i.e. the amount of revenue required).
posted by Urban Hermit at 12:24 PM on June 7, 2011
posted by Urban Hermit at 12:24 PM on June 7, 2011
"Manufacturing doesn't get taxed until it represents a retail sale. Construction isn't generally taxed at all, nor is health care, education, public administration, financial products, or real estate. Or, at least, those things are subject to their own taxes, not sales tax."
This isn't true per say. If Alberta were to introduce a sales tax (well, if it was to implement a VAT in the form of the HST/GST which for economic reasons I hope it would) financial products like mutal fund fees, selling the construction products, most services, new homes, etc would fall under the tax. The same is true for various stages in the manufacturing product stages, at least the parts that are value-added within the province.
Still, as we see with Urban Hermits and your numbers, the VAT would have to be at least 15% on top of the 5% federal tax to have any hope in covering the loss non-renewable energy. That would not be politically viable in Canada's most conservative province.
posted by hylaride at 12:50 PM on June 7, 2011
This isn't true per say. If Alberta were to introduce a sales tax (well, if it was to implement a VAT in the form of the HST/GST which for economic reasons I hope it would) financial products like mutal fund fees, selling the construction products, most services, new homes, etc would fall under the tax. The same is true for various stages in the manufacturing product stages, at least the parts that are value-added within the province.
Still, as we see with Urban Hermits and your numbers, the VAT would have to be at least 15% on top of the 5% federal tax to have any hope in covering the loss non-renewable energy. That would not be politically viable in Canada's most conservative province.
posted by hylaride at 12:50 PM on June 7, 2011
financial products like mutal fund fees, selling the construction products, most services, new homes, etc would fall under the tax.
I was operating under the assumption that when the OP said "sales tax" he meant "sales tax" not "VAT." Which would indeed work differently, but still wouldn't make a difference.
posted by valkyryn at 12:13 PM on June 8, 2011
I was operating under the assumption that when the OP said "sales tax" he meant "sales tax" not "VAT." Which would indeed work differently, but still wouldn't make a difference.
posted by valkyryn at 12:13 PM on June 8, 2011
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posted by KokuRyu at 11:19 AM on June 7, 2011