While researching my recent article on minimum wage, I encountered a file from last year on the Government of Alberta website containing corporate tax revenue information going back to 2002.
I thought I’d share a few things I found interesting.
Top 10 corporate tax generators
First, corporate tax revenue for Alberta was about $4.3 billion in 2019. That revenue was broken down into 22 industry categories (well, 21, but there was one called “unknown”).
Here are the top 10:
|Industry group||Tax revenue|
|Finance and insurance||$726,052,145|
|Real estate and rental and leasing||$307,004,919|
|Management of companies and enterprises||$297,393,325|
|Transportation, warehousing, and storage||$250,620,109|
|Professional, scientific, and technical services||$231,624,617|
|Health care and social assistance||$149,949,222|
These 10 industry groups made up 83.5% of all corporate income tax revenue for Alberta last year. Here’s what they look like in a pie chart:
The remaining 12 industry categories, of course, made up the other 16.5%, bringing in about $638 million.
Oil and gas
Second, notice anything missing?
Oil and gas, which politicians repeatedly claim is the biggest driver of Alberta’s economy, doesn’t make the list of the 10 industries that generated corporate tax revenue in 2019.
Where did it fall? 12th place. Right after information and cultural industries.
The oil and gas industry brought in $119 million last year in corporate income tax revenue for the province. That’s only 2.8% of all corporate income tax revenue and 16% of the amount that the largest generator—finance and insurance—brought in. It’s also 79% of the amount that health care and social assistance brought in. Heck, for every $1.00 oil and gas extraction generated in corporate tax revenue last year, museums and art galleries generated $1.24.
Actually, interestingly enough, the oil and gas industry generated negative corporate income tax revenue in each of the two years prior to the 2018–2019 fiscal year.
Oil and gas extraction hasn’t been in the top 10 tax-generating industries since 2014–2015, and during the 13 years leading up to and including 2014–2015, it was the top tax generating producer in only 7 of them.
In 2009–2010, when it had generated nearly $2 billion—its highest amount in that entire 17-year period—it accounted for 43% of all corporate income tax revenue generated in the province. The previous year, it brought in $1.2 billion, 30% of all corporate income tax revenue.
But why then? Was it the lower income tax rate? Do low tax rates bring in more revenue?
Well, let’s look at the tax rate during that period.
|Year||Tax revenue||% of total|
Hmmm. On first glance the tax rate was lower in 2009–2010 than it was in 2003–2004, when the revenue generated was 1/10th the size of what it was in 2009–2010.
But then again, the next year, when the tax rate was still at 10%, the revenue dropped to about 25% of that generated in 2009–2010. And even as it stays at the same rate for another 4 fiscal years, the tax revenue drops again, but then climbs again.
So lower taxes don’t seem to really generate more tax revenue. Which, actually, when you think about it, kinda makes sense. If tax rates are lower, the only way you could get more tax revenue were if profits were way higher.
What about GDP? Maybe they were producing less in the 2018–2019 fiscal year, so they’d be paying less in tax.
I could find only GDP data going back to only 2007–2008. That’s a lot of numbers. Maybe another graph would help.
Okay. So, that’s weird. GDP had been rising over this 12-year period, even though corporate income tax revenue has been sort of up and down. In fact, when tax revenue from oil and gas was at its highest level (in 2009–2010), GDP was at one of its lowest levels.
So, if oil and gas tax revenue wasn’t in the top 10 in 2019–2010 because of tax rates that are too high or because the industry isn’t producing enough, then what could it be?
Check out this chart:
This compares the corporate income tax revenue generated by the oil and gas extraction sector between 2004–2005 and 2018–2019 with the oil prices during the same period.
At first, it looks like there’s no correlation: when one is up, the other is down, and vice versa. But what if it takes a year or two for oil price changes to influence corporate income tax revenue?
If that’s the case, then pretty much every rise in oil and gas tax revenue seems to correspond to a rise in oil prices a few years previous, and same goes for any drops in oil prices.
Granted, oil prices aren’t the only factor that determines tax revenue. Certainly tax rates and production will influence the amount companies in the industry pay in taxes. However, it seems as though oil prices have the most impact out of the three factors.
Oddly enough, there are only two industries which posted negative results in the corporate income tax revenue dataset. One of them, of course, was oil and gas extraction, which—as I indicated above—showed losses in 2016–2017 and 2017–2018. The other industry was mining, also with losses in the same fiscal years as oil and gas.
Every other industry group in the dataset showed positive contributions to corporate income tax revenue every year for the Alberta government.
Personal income tax
Finally, I just have this one point I want to bring up about personal income tax.
This chart shows all the income tax collected by the provincial government between 2008 and 2019.
Personal income tax—what you and I pay—makes up a larger portion of income tax collected by the government than corporate income tax. In 2017-2018—the year with the greatest divergence—there was 213% more income tax revenue generated by individual taxpayers than there was by corporations.
Even in the year with the narrowest gap (2009–2010), personal income tax revenue was still 166% higher than corporate income tax revenue.
Keep that in mind as you consider that since last summer, the UCP has cut corporate income tax three times, but has left personal income tax untouched.
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