March 26, 2015 / 9:39 PM / 4 years ago

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

CALGARY (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.

The Prentice government also plans to introduce a graduated levy to support the provincially funded health care system, which accounts for nearly 40 percent of the C$48.39 billion the province expects to spend in the upcoming fiscal year.

The tax, effective from July 1, will kick in at a maximum C$200 for those earning more than C$50,000, rising to C$1,000 for anyone earning more than C$130,000 per year.

The province will raise taxes on gasoline, liquor and cigarettes and boost fees for licenses, traffic fines and other services.

The province expects to tap its C$6.5 bln contingency fund to cover its deficit.

($1 = 1.2482 Canadian dollars)

Editing by Alan Crosby

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