In Brief: In this story about the harmonized sales tax, AIMS acting President Charles Cirtwill makes the case for overall tax cuts, rather than specific tax cuts and rebates.
New Brunswick taxpayers may be looking across the Northumberland Strait with some envy following the decision of Premier Robert Ghiz to continue shielding Islanders from provincial sales tax on home heating and electricity bills.
Canada’s smallest province is reported to have pulled out of negotiations with Ottawa to introduce the Harmonized Sales Tax (HST) because the federal government wouldn’t agree to exclude essential items like electricity bills and home heating oil, which aren’t currently taxed by the province.
New Brunswick’s Liberal government cancelled the HST rebate that was introduced by the former Conservative government when it took power despite its campaign promise to uphold the rebate on the 8 per cent provincial portion of the 13 per cent tax.
The Graham government kept its campaign promise to cut the province’s gas tax by 3.8 cents per litre.
But with New Brunswickers feeling the burden of skyrocketing energy commodities like heating oil, electricity, and gasoline, there are suggestions that government leaders in Ottawa and Fredericton can do more to soften the blow.
As Finance Minister Victor Boudreau has repeated in the past as he oversees a review of the province’s tax system, department spokeswoman Vicky Deschenes explained yesterday that the province is limited in its ability to offer relief to taxpayers.
“The federal government decides if home heating is taxed, or anything else. This is not a provincial decision. The province can offer a credit … if they want it to be removed they charge the tax and then they offer a credit,” said Deschenes.
She said New Brunswick would need to partner with Ottawa and either Nova Scotia or Newfoundland and Labrador, the other provinces that use the HST, in order to increase or decrease the provincial portion of the tax.
But Canadian Taxpayers Federation director John Williamson says there is nothing that prevents New Brunswick’s Liberal government from shielding taxpayers from the HST in some sectors, besides political will.
Williamson said yesterday that there are plenty of ways the province could move ahead on its own to help New Brunswickers reeling from increases in electricity rates and home heating oil.
“There is certainly no doubt that the province can move on its own, it certainly does not need to wait for federal leadership or for other Atlantic provinces to act with it,” he said, acknowledging that the province does need to work with Ottawa and a provincial partner to make actual rate changes.
“But in terms of providing specific relief here and there, gas tax for example, home heating, nothing prevents the legislators from providing the relief to provincial taxpayers.”
Beyond some obvious examples, like the direct refund on virtually every form of home heating tax that is offered by the Nova Scotia government, Williamson says the Liberal government could get creative and decide to stop taxing the HST on federal and provincial gas taxes.
“By imposing the 13 per cent (HST) on the 10 cents federal tax levy and New Brunswick’s 10.7 cents, that drives the price up by over three cents a litre. That adds up over the course of a year,” he said. “That is another example of what can be done by provinces if they want to help consumers.”
About 33 per cent of the price of a litre of gas is tax.
Williamson says there are plenty of precedents for the usefulness of point-of-sale rebates.
“A point of sale rebate is what any of the three provinces could do, for example, if they wanted to no longer impose the HST on provincial and federal gas levies,” said Williamson.
Nova Scotia offers a point-of-sale rebate on home heating options. The rebate has been revamped so that taxpayers are automatically refunded when they purchase most forms of home heating. That way, they don’t pay the provincial portion of the HST at all.
Charles Cirtwill, acting president of the Atlantic Institute for Market Studies, says the new model ensures all taxpayers can benefit from the rebate.
He says Nova Scotia’s arrangement proves that where there is a will, there is a way.
“This is the wonderful foolishness that everyone who is opposed to these intergovernmental agreements get up to. They say you are giving up your sovereignty and you can’t do this type of stuff. It’s just not true,” he said.
“They didn’t need the feds to sign on for anything; they just rebated their share.”
Williamson and Cirtwill agree that they would prefer to taxes reduced across the board rather than specific tax cuts and tax credits.
But for a province like New Brunswick that has seen its taxes heading in the other direction since Liberal government took power, Cirtwill doesn’t deny the rebate’s benefits.
“I certainly don’t object to getting my HST rebate, and I’m sure there are lots of other people who think it’s equally nice to have, but the problem with these types of rebates are they assume you have the money to pay the bill in the first place.”
Moncton Crescent Conservative MLA John Betts criticized the Liberal government’s decision to cut the HST rebate and gave the government credit for reducing the gas tax.
“The thing that it is hurting is the middle income workers,” said Betts of the accumulated impact of increased personal income tax, property tax assessments, and rising power rates.
New Brunswick’s Energy and Utilities Board ruled last week that NB Power’s request for a 6.4 per cent rate increase was too high, and recommended that government allow a 5.9 per cent increase. Energy Minister Jack Keir is reviewing the recommendation.