In Brief: As the global economic crisis deepens, New Brunswick Premier Shawn Graham says his government may have to back away from significant tax reform. AIMS Executive Vice President says it is actually the government’s tax reform programme that will help the province and to delay is wrong.

FREDERICTON – The Liberal government is blaming the economic slump for having to slow down its plans for significant tax reform in the coming year, even though experts agree cutting taxes is one of the best ways to weather the financial storm.

Premier Shawn Graham indicated economic tough times mean government must slow down its plans for tax reform, move cautiously with changes to local government, and reduce the size of the civil service.

“The last thing we want to do as a government right now is make a decision that could compound the economic situation that New Brunswick and Canada is facing internationally,” he said, prior to his government’s throne speech.

The economy and its impact on government’s plans for the coming year dominated the speech as Graham warned tough decisions will have to be made.

Graham said government will need to consider the economy before moving forward with any major decisions.

“Any reforms to the taxation system have to be taken into account with the current global uncertainty,” he said. “We need to make sure the revenue streams that were (projected) in the taxation discussion are still going to be in place today.”

Taxes were referenced in two paragraphs within the 15-page speech.

An expected drop in growth next year, coupled with increased spending pressures, presents some serious challenges, the speech stated.

“This reality will require, more than ever, that your government remains focused on the most important priorities for all New Brunswickers,” read Lt.-Gov Hermén├ęgilde Chiasson. “There is no question that difficult decisions will be required going forward to keep expenditures under control and to focus on results that support government’s self-sufficiency agenda.”

However, business leaders are questioning Graham’s reasoning for reining-in his tax plans, saying now is the time to introduce significant changes.

“I think this is exactly one of the policies he should look to moving forward on,” said Charles Cirtwill of the Atlantic Institute for Market Studies. “If there’s one policy that’s going to help New Brunswick rebound very quickly from any negative impacts from the current global crisis, this is the one.”

Cirtwill acknowledged governments must be mindful of the economic times before proceeding with major reforms. The province could afford to wait until summer to move forward with its tax changes, but not much longer, he added.

“If it’s a delay, I hope it’s a minimal one,” he said.

A legislative committee spent the past summer meeting with New Brunswickers to discuss possible tax reforms. Copies of the committee’s report, which have been leaked to the media, recommend implementing a flat income tax rate of 10 per cent and boosting the Harmonized Sales Tax.

Finance Minister Victor Boudreau has said he wants to begin implementing the changes in the spring budget, expected before the end of March. However, over the last couple of days politicians have dampened those expectations and yesterday Graham refused to commit to moving forward this year.

Instead, Graham said government will release its response to the committee’s report sometime during the spring sitting of the legislature.

The premier also said he will continue to lobby the federal government to ensure they won’t stand in the way of any tax reforms.

The province needs Ottawa’s permission to increase the provincial portion of the HST.

The Liberals’ sudden reversal on the major reforms has left Opposition leader David Alward wondering what exactly the premier plans to do to help New Brunswickers struggling to pay the bills.

“This is like a Seinfeld episode — it’s a show about nothing,” he said, referring to the popular TV program. “I think all New Brunswickers are left wanting, left very disappointed.”

Alward said he’s pleased the province has stalled its plans to hike the HST, noting that Great Britain recently announced it’s considering lowering its sales tax.

However, he argued that by cutting income taxes, government could help boost the economy.

“This government increased income taxes, they increased small business tax and for medium and large corporations as well,” he said. “Obviously as a party we believe strategic reductions for them make sense, especially at a time of economic uncertainty.”

Although the province is putting the brakes on its tax reforms, the Liberals are moving forward with plans to review every government service and program to find ways to cut expenses.

The premier wouldn’t rule out civil service lay-offs, but said the majority of savings will likely come from retirements.

“Close to 25 per cent of our public servants are going to be retiring in the next five-year period. That’s why we’re going to take this as an opportunity, as those retirements occur, to find ways to deliver services with less bodies.”

The speech contained only a passing reference to a much-anticipated report on local governance.

The report, which is expected to be completed this year, will examine everything from property tax, the number of unincorporated areas in the province, to funding for municipalities.

Graham said government will respond to the report by the spring, but didn’t commit to moving forward with any changes this year.

Although it’s unknown how government will tackle the thorny issue of property tax, the speech includes a promise to make it easier for homeowners to appeal their property assessments.

The speech, which lacked details, focused on many past initiatives and previously-pledged commitments.

Graham reiterated his pledge to cap electricity rates increases at three per cent annually until 2010.

Among the new items contained in the speech were promises to require municipalities and water and wastewater commissions to report annually to government, a new student code of conduct to help prevent bullying, the creation of a chief building inspector position and a pledge to move forward with community college reforms.

David Plante of Canadian Manufacturers and Exporters said he was disappointed with the lack of new initiatives to help provincial businesses.

“The speech seems to recognize that we’re not even near the eye yet of a real economic and global storm,” he said. “(Yet) there weren’t any real substantive measures that were announced that could help industry and consumers alike during this very difficult period.”

Now is the time to move forward with tax cuts, he added.

“This is clearly one of those real opportunities we would have to make some changes that would further (provide) confidence at the very least and help spur our economy.”