How Alberta’s tech sector is affected by cuts in much anticipated 2019 provincial budget

Alberta’s United Conservative Party, under the leadership of Premier Jason Kenney, has tabled its first budget since the party took leadership of the province in April.

The 2019 provincial budget has been much anticipated since Kenney took the reigns, with the premier stating plans to curb spending, even commissioning a review panel that was meant to inform the budget. The panel publicly released its findings and recommendations on Alberta’s finances in early September, calling for a stop to government spending and the need to cut $600 million in order to reach a balanced budget by 2022 – 2023.

During this review process, several provincially-funded tech and innovation programs were suspended or up-in-the-air, including entrepreneurship programming at Alberta Innovates and a $100 million commitment from the previous government to Alberta’s artificial intelligence (AI) sector.

A day ahead of tabling the budget, Kenney indicated it would be a “challenging” budget, with Alberta’s Minister of Finance Travis Toews signalling that it would “set a new direction” for the province. The government’s budget outlines $1.3 billion in cuts, with the province cutting operating spending by 2.8 percent over the coming years. The budget also claimed that the United Conservative Party could eliminate Alberta’s $8.7 billion deficit by 2022 – 2023.

Tax cuts, tax credits

In line with the review panel’s recommendations, the Kenney government budget put an emphasis on its desire to make Alberta into a competitive environment for businesses and investments, both foreign and domestic.

“By 2022, Alberta is going to be one of the most tax competitive places in North America.”

“Budget 2019 builds on the government’s early achievements to support job creation,” the budget stated. “It continues to lay the foundation for viable and sustainable economic growth. By 2022, Alberta is going to be one of the most tax competitive places in North America for investment.”

To do this the United Conservative Party, agreeing with the review panel’s suggestion, stated plans to reduce the corporate income tax rate from 12 percent to eight percent over four years. It also suggested implementing an enhanced capital cost allowance that would provide up to $900 million in tax deferrals over four years for companies that make new investments in Alberta and $75 million, starting in 2020 – 2021, to grow and sustain foreign investment in the province. The budget estimated that in its full capacity the proposed corporate rate reductions would benefit at least 100,000 Alberta businesses.

“Corporations taxed at the general rate are the principal drivers of private investment and economic activity, and account for 90 percent of provincial corporate income taxes paid,” the budget read. “They make large investments that help drive Alberta’s economy and employ many Albertans.”

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The United Conservative Party’s critics, though, were quick to jump on these plans, with opposition NDP leader Rachel Notely calling them a hand-out to big corporations and the super-rich, according to CTV News.

However, even with the reduction in corporate taxes, the budget proposed cutting five business tax credit programs, including the Alberta Investor Tax Credit (AITC), that have been lauded by some in Alberta’s tech and innovation sector for bringing in much-needed venture capital.

Over the summer, Alberta’s government had paused the AITC, a tax credit that granted a 30 percent rebate on the amount of equity capital invested in an eligible Alberta small business working in the research, development, or commercialization of new technology. It also froze the Capital Investment Tax Credit, a program providing businesses in certain sectors with a tax credit of up to $5 million.

The budget officially eliminated the AITC and the Capital Investment Tax Credit, as well as the Community Economic Development Corporation Tax Credit, all of which had been implemented by the previous NDP government. The Interactive Digital Media Tax Credit and the Scientific Research and Experimental Development Tax Credit (SR&ED) are also being eliminated.

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Alberta’s SR&ED program is set to be eliminated starting in 2020, with no new approvals being granted as of October 24. Businesses already approved under the AITC or the Community Economic Development Tax Credit have until December 31 to raise capital for these credits. The budget noted that corporations and individuals will still be able to claim any unused credits, as part of those two programs.

The budget claimed that eliminating these five tax credits would reduce Alberta’s tax expenditures by over $400 million by 2022 – 2023. The government also stated that the reductions to the corporate income tax rate will make Alberta among the most attractive investment destinations in North America by 2022, explaining that Alberta’s corporate tax rate will be 30 percent lower than any Canadian province and that Alberta will have a lower combined federal-provincial corporate tax rate than 44 US states.

Less money overall

The province’s Ministry of Economic Development, Trade, and Tourism, the ministry responsible for Alberta’s tech sector, took a hit in the budget, with its operating budget being slashed from $349 million the previous year, to $286 million.

More than $200 million will be spent on research, innovation, and commercialization in order to develop talent, grow sectors, leverage funding.

The budget suggested that with “renewed and refocused investment” the ministry’s budget would grow to $300 million in 2022 – 2023. The cuts to the ministry follow cuts across the provincial government’s operating expenses, but came with the mandate of attracting large corporate investments to the province and growing its presence globally. The government also wants to support research, innovation, and entrepreneurship through post-secondary institutions, Alberta Innovates, Alberta Enterprise Corporation, and Economic Development.

The budget noted that more than $200 million will be spent on research, innovation, and commercialization in order to develop talent, grow sectors, leverage funding from partners and private sector and help drive global investment.

The post-secondary education system overall saw some major changes in the budget. With Kenney’s government noting plans to review system funding to make it more responsive to skills shortages and future labour market changes, the budget also put forward lifting the five-year tuition freeze “to realign the balance between taxpayers and students’ own investment in their future.”

An Alberta Advantage Immigration Strategy, putting aside $2.5 million to support foreign qualification recognition and getting immigrants into jobs faster, was also suggested to aid in Alberta’s “competitiveness”.

The budget also addressed the United Conservative Party’s carbon tax repeal plans, giving details on the previously announced Technology Innovation and Emissions Reduction (TIER) system. With a dedicated TIER fund used to develop and implement technologies that further reduce greenhouse gas emissions over time. The budget stated that the first $100 million in annual revenue, and 50 percent of the remaining revenue paid into the fund, will be used for emission reduction projects.

AI and entrepreneurs

While no specific recommendations had been made on Amii and Alberta Innovates in the early fall review, the province’s budget addressed the programs, which also saw cuts.

In February, the previous provincial government promised $100 million, over five years, to help invest in Alberta’s burgeoning and promising AI sector. The recent provincial budget offered $35 million “to bring Alberta technologies to the market,” in sectors that are not limited to, but including, artificial intelligence and autonomous systems.

Alberta Innovates, a research and development organization with locations in Calgary and Edmonton, which offers entrepreneur funding programs was promised $6.5 million to support its programming.

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“We’re glad to see funding for AI and Amii included in the budget documents, and we look forward to working out the details in the coming months,” Spencer Murray, director of communications and public relations at the Amii told BetaKit. “As those details become available, we’ll ensure they’re communicated out appropriately.”

BetaKit has also reached out to Alberta Innovate for comment but had yet to hear back by the time of publication.

Image source Office of the Premier of Alberta via Flickr

Meagan Simpson

Meagan Simpson

Meagan is the Associate Editor for BetaKit. A tech writer that is super proud to showcase the Canadian tech scene. Background in almost every type of journalism from sports to politics. Podcast and Harry Potter nerd, photographer and crazy cat lady.