UPDATE 1-Canada's Alberta hikes taxes, fees as budget deficit returns

Thu Mar 26, 2015 6:19pm EDT
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(Adds Finance Minister's quotes, oil sector background)

By Scott Haggett and Nia Williams

CALGARY, March 26 (Reuters) - The Canadian province of Alberta said in its budget on Thursday it will hike fees, boost taxes, cut spending on healthcare and education, and tap its savings to overcome a massive drop in revenue from the oil industry.

The province, whose oil sands are the largest source of U.S. crude imports, said it expects to post a budget deficit of C$4.99 billion ($4 billion) for the fiscal year beginning April 1, and C$3.05 billion for the next, following a C$248 million surplus for the 2014/2015 fiscal year. It expects to return to surplus in the 2017-2018 fiscal year.

In his first budget since winning the leadership of Alberta's ruling Progressive Conservative party in September, Premier Jim Prentice moved to wean the province off its dependence on revenue from its energy sector.

Crude prices have fallen by more than half since June, cutting royalties and payments from the industry to an expected C$2.89 billion from C$8.79 billion this fiscal year.

"One out of every seven dollars in government revenue is gone," Robin Campbell, the province's finance minister, said in the text of his budget speech. "That is close to the education budget for the entire year."

To cope with the shortfall while holding government spending steady in the growing province of 4.1 million, the government said it will boost its flat income tax for those earning C$100,000 or more to 10.5 percent from 10 percent.

The levy on incomes above C$250,000 will rise to 11 percent beginning in 2016. For all incomes over C$100,000, the tax will rise by 0.5 percentage point in 2017 and 2018.   Continued...