Alberta
Alberta bill proposes regulatory ‘sandbox’ to help financial-tech companies grow
By Dean Bennett in Edmonton, Alberta, Canada
Alberta is proposing rules that would make it easier for entrepreneurs to test products in the emerging field of cryptocurrencies and online banking.
Finance Minister Travis Toews says a bill before the legislature calls for setting up what is known as a regulatory “sandbox.”
Companies would be allowed to temporarily break or ignore select financial rules and regulations under close government supervision to test new programs.
Companies would also be able to get access to Albertans’ private information, but only within strict parameters and only with that person’s permission.
Toews says the “sandbox” is being used in the United States, Australia and the United Kingdom to help create tech jobs and to keep those regions on the cutting edge of financial technology.
If the bill passes, companies could look at innovations in everything from cryptocurrencies to financial apps, security protections and real-time, multi-user financial accounting.
The government hopes to begin taking applications on July 1.
“This will be a strong incentive for fintech companies to move to Alberta and create jobs,” Toews said Wednesday before introducing the bill in the legislature.
“In turn, it will further help diversify our economy and add to our growing reputation as a hub for world-class financial services.”
The government says the legislation would make Alberta the first such “sandbox” jurisdiction in Canada.
Companies would have to have some physical presence in the province, such as an office or senior staff.
They would be offered certificates granting them permission to perform tests or functions normally declared out of bounds under the Loan and Trust Corporations Act, the Credit Union Act and other related rules governing finance.
The companies would have their names, details and programs on a public website.
The government would be free to change the rules to adjust to changing circumstances during testing.
Alberta’s information and privacy commissioner would have to sign off on exemptions.
“(The bill) is carefully designed to ensure any companies participating in the sandbox operate in a safe and sound manner,” said Toews.
Breaking the rules could result in fines up to $100,000 for a first offence and up to $200,000 for subsequent violations.
Toews said the province is seeking a higher profile and to gain benefits from the emerging fintech industry.
The province expects interest in a range of technologies, including blockchains, which are decentralized online record- keeping and authentication programs for cryptocurrency transactions.
There are also developments in software allowing apps to talk to each other and security precautions such as fingerprint and facial recognition.
There is emerging work in database accounting programs that can be shared in real time across multiple platforms.
This report by The Canadian Press was first published March 30, 2022.
Alberta
Alberta government should eliminate corporate welfare to generate benefits for Albertans
From the Fraser Institute
By Spencer Gudewill and Tegan Hill
Last November, Premier Danielle Smith announced that her government will give up to $1.8 billion in subsidies to Dow Chemicals, which plans to expand a petrochemical project northeast of Edmonton. In other words, $1.8 billion in corporate welfare.
And this is just one example of corporate welfare paid for by Albertans.
According to a recent study published by the Fraser Institute, from 2007 to 2021, the latest year of available data, the Alberta government spent $31.0 billion (inflation-adjusted) on subsidies (a.k.a. corporate welfare) to select firms and businesses, purportedly to help Albertans. And this number excludes other forms of government handouts such as loan guarantees, direct investment and regulatory or tax privileges for particular firms and industries. So the total cost of corporate welfare in Alberta is likely much higher.
Why should Albertans care?
First off, there’s little evidence that corporate welfare generates widespread economic growth or jobs. In fact, evidence suggests the contrary—that subsidies result in a net loss to the economy by shifting resources to less productive sectors or locations (what economists call the “substitution effect”) and/or by keeping businesses alive that are otherwise economically unviable (i.e. “zombie companies”). This misallocation of resources leads to a less efficient, less productive and less prosperous Alberta.
And there are other costs to corporate welfare.
For example, between 2007 and 2019 (the latest year of pre-COVID data), every year on average the Alberta government spent 35 cents (out of every dollar of business income tax revenue it collected) on corporate welfare. Given that workers bear the burden of more than half of any business income tax indirectly through lower wages, if the government reduced business income taxes rather than spend money on corporate welfare, workers could benefit.
Moreover, Premier Smith failed in last month’s provincial budget to provide promised personal income tax relief and create a lower tax bracket for incomes below $60,000 to provide $760 in annual savings for Albertans (on average). But in 2019, after adjusting for inflation, the Alberta government spent $2.4 billion on corporate welfare—equivalent to $1,034 per tax filer. Clearly, instead of subsidizing select businesses, the Smith government could have kept its promise to lower personal income taxes.
Finally, there’s the Heritage Fund, which the Alberta government created almost 50 years ago to save a share of the province’s resource wealth for the future.
In her 2024 budget, Premier Smith earmarked $2.0 billion for the Heritage Fund this fiscal year—almost the exact amount spent on corporate welfare each year (on average) between 2007 and 2019. Put another way, the Alberta government could save twice as much in the Heritage Fund in 2024/25 if it ended corporate welfare, which would help Premier Smith keep her promise to build up the Heritage Fund to between $250 billion and $400 billion by 2050.
By eliminating corporate welfare, the Smith government can create fiscal room to reduce personal and business income taxes, or save more in the Heritage Fund. Any of these options will benefit Albertans far more than wasteful billion-dollar subsidies to favoured firms.
Authors:
Alberta
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