The curious case of the missing Alberta billionaire, his taxes, and what it means for government revenue

For more than a month now, Calgarians, particularly wealthY ones, have been chattering about Murray Edwards and his move to London. The oil billionaire looms large in Calgary, as a man with a stake in many of the things the city cares about: oil, hockey and the mountains.

But Edwards is known first and foremost as a highly successful businessman. Self-made, very smart, very rich. So if he left the country for tax reasons, as is suspected, are other Albertans? If they aren't considering it, should they be?

'You don't need many to do it to have a huge cost.' - Alexandre Laurin, C.D. Howe Institute

Edwards himself refutes the notion his change of address from Calgary to London, England, is to avoid a higher tax bill, telling the Globe and Mail that he left the country for personal reasons.

However, there is no question Edwards is leaving town just as tax bills are going up for Alberta's wealthy, following provincial and federal income tax rate increases for 2016.  

W. Brett Wilson studio

W. Brett Wilson doesn't think Edwards left Alberta to reduce his tax bill. (Danielle Nerman/CBC)

Taxes much higher for wealthy Albertans

The highest marginal tax rate for Albertans in 2014 was 39 per cent, in 2016, it is 48 per cent. 

Previously, Alberta was known for its provincial flat tax of 10 per cent for all income levels. But that rate was axed by the former Progressive Conservative government in early 2015. A short while later, the new NDP government brought in four new marginal tax rates.

In 2016, Albertans with an income above $300,000 will pay a 15 per cent tax rate provincially. Federal taxes will also increase in 2016, to a maximum of 39 per cent for those who make $300,000 or more.

Add it up and it's a big hit for Alberta's wealthy. 

"What he's struggling with and what every businessman is struggling with is the sheer incompetence that's been layered over us at the municipal and federal and provincial levels by inexperienced governments," said Brett Wilson, a Calgary investment banker and close friend of Edwards.

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NHL commissioner Gary Bettman (left) and Murray Edwards, co-owner of the Calgary Flames, make their way to collective bargaining talks in Toronto on Thursday October 18, 2012. (THE CANADIAN PRESS/Chris Young)

The cost of lower taxes

"There's a certain caliber of person who can tax plan through mobility," said Lindsay Tedds, a taxation expert at the University of Victoria. "But it's costly to do, so you have to be earning a large amount of money to absorb those costs."

If you choose to give up residency in Canada, for any reason, it's sort of like dying. The Canada Revenue Agency will consider that you've disposed of all your assets just before leaving the country and then tax you on the capital gains. That would include shares in companies and properties, excluding your principal residence.

Competition for the rich

"There has always been and will continue to always be a competition for these kinds of people," said David Lesperance, a Canadian lawyer who specializes in tax mobility.

The advantage in moving to the United Kingdom is that you can be a non-domiciled resident, meaning the U.K. is not your permanent home. With that standing, you don't pay tax on your foreign income unless it's income you bring into the country to pay your living expenses.

If you draw on capital or savings to pay for your lifestyle, then you don't have to pay tax on your worldwide income at all.

Instead the U.K makes money off those residents by charging at 20 per cent V.A.T, or sales tax on purchases.

"London has a huge number of these res-non doms," said Lesperance. "And it bolsters the economy in the U.K. tremendously."

 

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Murray Edwards of Calgary (left) shakes hands with Governor General David Johnston as he was invested as Member to the Order of Canada at a ceremony at Rideau Hall the official residence of the Governor General in Ottawa, Friday November 21, 2014. ( THE CANADIAN PRESS/Fred Chartrand)

A hit to provincial coffers

There's speculation that Alberta will see some degree of tax flight in the coming year, but it will be hard to figure out exactly what's at play.

"These tax rates are rising at the same time that we are facing some very significant economic changes going on in the province," said Tedds.

"The exchange rate has dropped significantly and has been bouncing around. Oil prices, people just aren't sure when they'll recover. There's just too much going on at the same time to say the tax rate is the cause or even a contributing factor."

In Canada, the top one per cent of earners pay 20 per cent of personal income taxes. They are also the people that are the mostly likely to change their behaviour to avoid paying higher taxes. Moving out of the country is obviously the most extreme example of that, but the damage to government coffers can be noticeable.

"You don't need many to do it to have a huge cost," said Alexandre Laurin, a tax expert at the C.D. Howe Institute.

"They're usually your highest worth individuals, reporting millions and millions of dollars of income, so you just lose ten of them and you've just lost a whole lot of tax revenues. 

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