Alberta: Economic Trends and Taxation Developments for Small Business Owners

by John Burke

4 min read

In 2014, after a sharp decline in oil prices, thousands of Alberta residents lost jobs, businesses shuttered, and the economy struggled. As of 2017, the province is headed toward a full recovery. The ministry at the helm of this recovery is the Alberta Treasury Board and Finance, which handles provincial development, fiscal policy, treasury management, and financial sector regulation, all of which are key to economic growth. For small business owners in Alberta, the government’s programs for dealing with a climate of lower oil prices are likely to impact their taxes and bottom line.

Anticipated Areas of Growth and Change

In 2017 and 2018, Alberta’s gross domestic product is expected to grow more quickly than the GDPs of any other province. In particular, the province plans to court growth with an increased focus on exports, especially agricultural exports. In 2017 alone, this sector should grow by more than 4.6% and boost the province’s GDP by 1.8 percentage points. On the other hand, construction may decline by close to 6% during this period, a reflection of reduced permit applications during the economic downturn.In addition to a quickly growing GDP, personal income and private investment is higher in Alberta than other provinces. To keep both measures healthy, the government’s 2016 budget increased funding to programs that support businesses and enhanced small business tax credits.

Business Support Programs

As of 2016, Manitoba’s government has increased funding to the following business support programs:

  • Small Business Incubators: The government has increased spending by $10 million to incubators such as the Apex Incubator in Medicine Hat and the Spark! Incubator in Grande Prairie.
  • Export Expansion Package: This program devotes $9 million over three years to the Export Expansion Package, the Export Support Fund, and the Export Readiness Program. These programs offer guidance and grants worth up to $20,000 for businesses expanding into exporting.
  • ATB Financial: The government has increased the limit on ATB’s borrowing by $1.5 billion, and ATB is working with Business Development Bank of Canada to provide $1 billion in small business loans. This increases the available funding for small businesses.
  • Alberta Innovates Voucher Program: Alberta doubled funding for this program, which provides funding to small businesses that want to commercialize new products or services.
  • Community and Regional Economic Support: Through CARES, local governments can apply for grants designed to promote long-term economic growth.
  • Alberta Small Brewers Development Program: Beer is fun. To improve the economy while also increasing the availability of craft beers, the government has increased funding to this grant program for small brewers in Alberta.
  • Self Employment Training: Support has also increased for this program, which offers guidance and business plan development for anyone who wants to launch an independent business.

Small Business Tax Credits

As of 2017, Manitoba offers several tax credits and financial incentives for small business owners. Like the above programs, these initiatives are designed to boost economic growth, increase diversity, and create more jobs.The Investor Tax Credit offers a 30% tax credit to eligible investors. Investors can invest in an eligible business corporation or an approved capital corporation, but the investments must be in companies doing research, developing products, or commercializing new technology. To claim this credit, you can also invest in companies doing interactive digital media, digital animation, video post-production, or tourism. In most cases, individual investors can claim a credit on their tax return for investments made in the previous tax year or in the current year up to April 14. Businesses that want to seek funding through this program must apply with the government.Designed to encourage capital investments and boost overall spending in the province, the Capital Investment Tax Credit is a nonrefundable tax credit for up to 10% of a corporation’s eligible capital expenses. To qualify, your corporation must spend a minimum of $1 million and up to $5 million on eligible expenses. Doing so can earn you a credit worth $100,000 to $500,000. As a nonrefundable credit, this credit can reduce corporate tax owed, but it cannot result in a refund.The Summer Temporary Employment Program provides a wage subsidy to eligible employers. To qualify, you must provide a meaningful summer work experience for high school or college students. The subsidy is worth up to $7 per hour for up to 37.5 hours per week and helps to offset the wages you pay these workers.Also, designed to increase work opportunities, the Canada-Alberta Job Grant covers up to one-third of the training costs business owners incur for eligible employees. If you qualify, you can claim up to $10,000 per trainee per year.Finally, as of 2017, the province has also lowered its small business tax rate. Businesses that qualify for the small business deduction earn a tax credit worth 10% of their taxable income, which lowers their effective tax rate to 2%.These programs, tax credits, grants, and initiatives help create a positive business environment in the province. For business owners, the important takeaway is that profits are expected to rise for corporations in Alberta. In 2017 net operating surplus is expected to increase by 60%.

References & Resources

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