Home April 2017 Everyone Wants a Tax Credit These Days

Everyone Wants a Tax Credit These Days

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Josh Bilyk

I read with great interest an article in the Edmonton Sun about how Edmonton video game giant BioWare is calling for a $10 million tax credit for Alberta’s interactive entertainment sector. BioWare general manager Aaryn Flynn says Alberta’s high-tech industry is “ready to explode” with the right level of government support. He points to programs in Quebec and British Columbia, which pay between 17.5 and 37 per cent of their payroll, as models for Alberta to follow. He says he doesn’t want to see smart, creative Alberta-trained professionals chasing tax credits to other provinces.

BioWare and others are lobbying the provincial government hard for a program, but they may have to get in line because everyone wants a tax credit these days.

However, they have every reason to be optimistic about their chances for eventual success. The provincial government is very open to these suggestions – especially if they fit into the government-favoured mold: supporting high tech, creative and green companies.

Recall that small, local breweries called for and received, a government grant program to help them fight it out with out-of-province beer makers. The petrochemical industry received a $500 million royalty tax credit that would incentivize them to process propane from natural gas resources into plastics. Now if we could just get NW Refining Phase II approved…

Last year the province rolled out two other programs to boost local businesses. The $90 million Alberta Investor Tax Credit provides a 30 per cent credit to investors who “provide capital to Alberta small businesses doing research, development or commercialization of new technology, new products or new processes.”

The two year, $70 million Capital Investment Tax Credit program covers 10 per cent of a corporation’s investment in machinery, equipment and buildings. As usual, some (many) restrictions apply, but the government is ready to play ball.

I don’t oppose any of these tax credits in isolation. In this environment, businesses need all the help they can get; but let’s not lose sight of the fundamental challenge they all seek to address: competitiveness. Every sector in Alberta is scrambling to find a way to justify their existence in Alberta. After all, manufacturing, video game making and plastic production can basically happen anywhere in the world. We’re all competing for finite investment dollars that flow freely across borders.

Let’s also remember government actions that have diminished Alberta’s overall competitiveness – like increasing corporate taxes by 20 per cent, bringing in a carbon levy that will cost businesses billions and hiking the minimum wage to $15 per hour.

Dramatically increasing the cost of doing business in the province and then trying to make it all better through boutique tax credits makes for an incoherent policy that enriches tax consultants and potentially makes Albertans poorer.

A better approach to growing the economy is to ensure Alberta has globally competitive tax rates, across the board that access economic infrastructure like air, roads and rail transportation; is affordable and high quality; and that Alberta businesses have access to the skilled labour they need. It needn’t be more complicated than that.

Alberta Enterprise Group is a member-based, non-profit business advocacy organization. AEG members employ more than 150,000 Canadians in all sectors of the economy.

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