In October, the Government of Alberta released an update on corporate income tax revenue—or as I like to call it, corporate profit tax revenue.
The update includes revenue data for the 2021–2022 budget year.
First, here’s a look at how much corporate profit tax revenue Alberta has brought in over the last 7 years.
What we see here is that during the UCP’s first two years in power—2019–2020 and 2020–2021—corporate profit tax revenues decreased.
The first year, they decreased marginally, 2.87%. The following year, those revenues dropped an additional 38.28%, reaching their lowest level during the reporting period.
They’ve since rebounded by a remarkable 65.42%. However, the $4.24 billion the government received in corporate profit tax revenue last year is still less than it was during the NDP’s last year in power, when it sat at $4.28 billion.
Now the decreases shouldn’t be that surprising. The UCP cut the tax rate on corporate profits during their first two years, and when you tax profits at a lower rate, you’re going to get less in taxes collected.
Plus, we experienced a massive economic slowdown during the first year of the pandemic, when businesses saw sales significantly decline, or even evaporate altogether.
On top of that, the price of oil tanked in the 2019–2020 budget year and stayed relatively low in 2020–2021, which would’ve impacted corporate profits in the oil and gas sector, one of Alberta’s significant industries.
Now, to be fair, the NDP also saw a loss in corporate profit tax, during the 2015–2016 recession that Alberta experienced. And that’s despite having increased the corporate profit tax rate from 10% to 12% the year before.
However, the NDP saw two consecutive increases to corporate profit tax revenue during the last half of their administration.
Here’s a look at how much revenue changed per year, on a percentage basis.
Remember, however, that even though last year saw such a huge jump, it’s still 0.84% lower than it was during the NDP’s final year and 4.57% lower than their first year.
It’d be interesting to know what last year’s revenue would’ve been had the UCP kept the corporate profit tax rate at 12% instead of slashing it to 8%.
By this point, you might be wondering how the tax revenue breaks down by indsutry sector. Well, here you go.
| Finance & insurance | $784.62 |
| Oil & gas extraction | $706.00 |
| Manufacturing | $631.34 |
| Wholesale trade | $268.43 |
| Transportation, warehousing & storage | $244.72 |
| Construction | $239.88 |
| Retail trade | $227.24 |
| Professional, scientific & technical services | $203.92 |
| Real Estate and rental & leasing | $201.70 |
| Management of companies & enterprises | $159.70 |
| Health care & social assistance | $143.75 |
| Information & cultural industries | $85.61 |
| Unknown | $67.64 |
| Other services | $64.01 |
| Agriculture, forestry, fishing & hunting | $58.27 |
| Admin & support, waste mgmt, & remediation serv | $58.23 |
| Accommodation & food services | $34.19 |
| Utilities | $24.55 |
| Mining (except oil & gas) | $24.23 |
| Educational services | $9.53 |
| Arts, entertainment & recreation | $2.12 |
| Public administration | $0.33 |
And here’s each industry compared to the previous year.
| 2020–2021 | 2021–2022 | Change | |
|---|---|---|---|
| Oil & gas extraction | -$212.31 | $706.00 | $918.30 |
| Manufacturing | $314.26 | $631.34 | $317.08 |
| Finance & insurance | $575.79 | $784.62 | $208.84 |
| Construction | $185.70 | $239.88 | $54.18 |
| Retail trade | $173.41 | $227.24 | $53.83 |
| Unknown | $19.88 | $67.64 | $47.75 |
| Management of companies & enterprises | $119.81 | $159.70 | $39.90 |
| Wholesale trade | $250.97 | $268.43 | $17.46 |
| Accommodation & food services | $21.42 | $34.19 | $12.78 |
| Agriculture, forestry, fishing & hunting | $45.97 | $58.27 | $12.29 |
| Admin & support, waste mgmt & remediation serv | $48.56 | $58.23 | $9.68 |
| Mining (except oil & gas) | $15.36 | $24.23 | $8.87 |
| Real estate & rental and leasing | $196.77 | $201.70 | $4.93 |
| Other services | $59.23 | $64.01 | $4.77 |
| Educational services | $6.22 | $9.53 | $3.31 |
| Transportation, warehousing & storage | $242.53 | $244.72 | $2.20 |
| Utilities | $22.36 | $24.55 | $2.19 |
| Arts, entertainment & recreation | $0.69 | $2.12 | $1.43 |
| Health care & social assistance | $143.67 | $143.75 | $0.08 |
| Public administration | $0.29 | $0.33 | $0.04 |
| Professional, scientific & technical services | $223.94 | $203.92 | -$20.01 |
| Information & cultural industries | $108.72 | $85.61 | -$23.11 |
In the second table, we see that oil and gas saw the largest increase in total corporate profit tax revenue collected, at nearly $1 billion.
There’s something to keep in mind, however. In 2020–2021, the oil and gas extraction industry was the only industry to see a decrease in corporate profit tax revenue collected.
In 2019–2020, the government collected $551.56 million from this sector. The following year, however, they received -$212.31 million. Yep. You read that right. That’s a negative.
In other words, corporate profit tax revenue in the oil and gas extraction industry dropped by $763.87 million in a single year.
That’s what happens when the price of oil bottoms out. When the price of oil is super low, corporate profits are low, too, which means less collected in tax revenue, which is a percentage of corporate profits.
The reverse is also true: when the price of oil jumps, corporate profits also increase. That leads to more tax revenue collected. Which explains the rise in revenue last year, especially since the price of oil was at its highest level during this past year then at any other point of this reporting period.
And before anyone mentions something like, “See? The government depends on the oil and gas industry! It’s the second largest contributor to corporate tax revenue!”, there’s something to keep in mind.
Even though corporate profit tax revenue increased by nearly $1 billion last year, it still accounted for only 16.65% of total corporate profit tax revenue.
In other words, nearly 85% of corporate profits tax revenue is collected outside the oil and gas revenue.
Not only that, but oil prices during the 2022-2023 fiscal year so far have been lower than they were last year (particularly the final quarter of the last budget year), so it’s unlikely we’ll see the oil and gas sector make up a similar percentage this year of total corporate tax revenue.
