MORINVILLE, Alta. – A conversation in a New York skyscraper has become a concern for many Alberta rural municipalities.
When Alberta premier Ralph Klein emerged from a meeting with Union Carbide executives on a New York business trip last year, he said the province’s M and E (machinery and equipment) tax was preventing the multinational chemical giant from investing in Alberta.
Klein’s comments generated a lot of talk at the annual gathering of the Alberta Association of Municipal Districts and Counties in Edmonton Nov. 13-16.
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The convention has been friendly confines in past years for the Klein government, whose spending cuts have been welcomed by rural municipalities.
Revenues required
But the government’s proposed reduction of the M and E tax placed several cabinet heavyweights in an unfamiliar defensive stance. About half of the organization’s 66 member municipalities rely on assessing heavy machinery and equipment tax revenues.
The province’s proposal would see the property tax reduced by 40 percent over a two-period year on the education portion of the assessment. Because the Alberta government collects education taxes, Smith said it won’t impact the revenues of industry-rich municipalities such as the Municipal District of Yellowhead, which stretches from the Jasper National Park’s eastern boundary to 100 kilometres west of Edmonton.
But Yellowhead reeve Ken Albrecht said Alberta has already given enough tax breaks to entice heavy industry into the province. A recent Peat Marwick report suggested Alberta is a tax haven for big companies compared with Canada’s other provinces.
“Alberta already has more than a 15 percent tax advantage (over other provinces),” said Albrecht, whose municipality receives 40 percent of its revenues from M and E taxation.
“(Heavy industry) claims other provinces don’t collect M and E, but what is called M and E in Alberta is called something else in other provinces.”
Corporations already receive a 50 percent break on the tax. After the final weld cools on a new pipeline, a gas company can claim a 35 percent reduction on its assessed taxable value. A few years later, the company is entitled to another 15 percent cut on the pipeline’s assessment.
Albrecht also questioned giving tax breaks to well-heeled companies during a time of government belt-tightening.
“Look at the bottom lines of the corporations operating in this province,” he said. “Take a look at Sherritt Gordon. Take a look at Nova. Take a look at Shell.”
The proposed reduction would cost the provincial government’s treasury about $60 million for each of the next two years. But economic development minister Murray Smith said it’s a small investment to spur growth in rural Alberta.
Smith predicted the tax break could generate $350 million in new property taxes and $1 billion in income tax revenues for the province.
“I see it as creating opportunities in communities where a kid from Rocky Mountain House could get his engineering degree and go back to his hometown and make $50,000 a year practising his profession,” Smith said.
Although Alberta might have some tax advantages compared to other Canadian provinces, Smith sees Texas, Kuwait and Italy as Alberta’s biggest rivals in courting new capital.
While the provincial cabinet has not approved the M and E tax reduction, one Tory MLA said the tax break faces a fierce fight within the party caucus, which has strong representation from rural Alberta.
Tough idea to sell
County of Wetaskiwin reeve Wallace Wilson thinks a tax cut for big corporations will prove a tough sell to his 9,700 ratepayers.
“I think we have the resources here; oil, gas, timber. As long as they are here, somebody will come to it,” said Wilson, whose county receives about 23 percent of its revenues from M and E taxes.
