Ryan Tax Alert – Alberta and Yukon 2007 Budgets

ALBERTA

Minister of Finance Lyle Oberg tabled the 2007 Alberta Budget on April 19, 2007. Focusing primarily on managing the extraordinary growth experienced by the province, which boasts an economy that grew by 6.9% in 2006, population growth of nearly 100,000 and its lowest unemployment rate in 30 years, the budget also addresses the government’s priorities of improving the quality of life in Alberta, providing safe and secure communities, and building a stronger province.

Albertans already pay the lowest overall taxes in Canada – a trend which will continue with personal income tax initiatives for the current year estimated to save taxpayers $200 million annually. In addition to personal income tax reductions and a decrease in the education property tax rate, two significant commodity tax changes were announced.

Tobacco Tax

In an effort to discourage the consumption of tobacco products, the province has announced a 16 per cent increase in tobacco tax rates, effective at midnight on April 19, 2007. Taxes will be raised $5 per carton of 200 cigarettes and 63 cents on a pack of 25 cigarettes. Tax rates on loose tobacco and cigars will also be increased at the same time, resulting in a tax rate on loose tobacco of 18.5 cents per gram (up from 16 cents) and a maximum tax on cigars, which is calculated based on 95 per cent of the taxable price, of $5.80 (up from $5.00).

Fuel Tax

The budget notes that, effective April 1, 2007, the province’s new Fuel Tax Act and related regulations came into effect. The new legislation is intended to streamline the administration of fuel tax and give effect to policy changes previously announced as part of the government’s bioenergy strategy. Consequently, effective April 1, 2007, ethanol and pure biodiesel are taxed at the same rate as gasoline and diesel (currently 9 cents per litre). This shift in strategy is designed to encourage the production of alternative fuels through the Renewable Energy Producer Credit Program, which gives companies 14 cents for every litre of ethanol and pure biodiesel produced, instead of providing tax exemptions for alternative fuels.

Additional information on the 2007 Alberta Budget may be found on the province’s web site at: http://www.finance.gov.ab.ca/business/budget/index.html.

YUKON

On April 19, 2007, Premier Dennis Fentie presented the 2007 Yukon Budget, which continues to support the Yukon’s growth by making key investments in the quality of life, the environment, a diversified private sector economy and good governance.

No significant commodity tax changes were announced.

Further details on the 2007 Yukon Budget are available from the territory’s web site at: http://www.gov.yk.ca/2007_2008budget.html.

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