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New taxes could fend off further budget cuts
Andrew Livingstone Northern News Services Published Monday, September 15, 2008
Sales Tax (does not currently exist)
HST - eight per cent on goods and services on top of the five per cent Goods and Services Tax (GST), raising sales tax to 13 per cent, would generate $59 million annually
RST - five per cent on goods and services on top of the five per cent Good and Services Tax (GST), raising sales tax to 10 per cent, could raise $30 million a year
Hotel Tax (does not currently exist) - five per cent tax applied to all rooms would generate $2.5 million a year
Airport Departure Tax (does not currently exist) - a $30 per passenger departing from NWT airports could generate $3.5 million a year
Health care premiums - introducing health care premiums could raise $9 million a year
Property taxes - a 10 per cent increase in mill rates, which would equal about $30 per house, would raise $2 million in annual revenue
Personal income tax - two per cent increase across the board
High income surtax (currently does not exist) - an eight per cent surtax on income tax for people who make $70,000 or more annually
Payroll tax - increasing the rate to three per cent from the current two per cent would generate $20 million in revenue
Fuel tax - increasing gas, diesel and rail fuel taxes by one cent per litre
Tobacco tax - increasing cigarette taxes to $46.40/carton from $42 and cigarette tobacco taxes to 15.2 cents/gram from 13.6 cents
Insurance tax - increasing taxes on all premiums to four per cent from three per cent would raise $1.2 million in annual revenue
Liquor mark-ups - increasing liquor mark-ups by 10 per cent would raise $1.2 million
Corporate income tax - raising rates by one per cent would raise $8 million
Corporate capital tax (currently does not exist) - a capital tax of 0.3 per cent for companies that are developing resources but have not yet started production
A discussion paper released last week by the Department of Finance presented tax options ranging from introducing a sales tax to levying airport fees.
The territorial government predicts it will fall $40 million short - $10 million this year and $30 million next year - in its $1.2-billion annual budget. Premier Floyd Roland said the government must either make budget cuts or implement new taxes to provide the additional revenues needed to achieve the government's goals.
"We have the instrument of taxation. It's a blunt one but if that's all we have and there's not an appetite to tighten our belts then we have to look at other options," Roland said.
The territorial government is seeking public feedback on its discussion paper, which looks at a wide range of increases and even the option of implementing completely new taxes, including a potential five per cent hotel room tax.
Both the premier and Finance Minister Michael Miltenberger said no specific change to taxation tops their lists as the best possible option but they plan to look at all the options listed in the report.
"It's very likely taxpayers will see an increase," said Miltenberger.
Ernest Firth, owner and operator of Shaanutee's Bed and Breakfast in Fort McPherson, said the proposed taxes are unbelievable. He was especially unimpressed with the proposed five per cent hotel tax.
"I'm really, really disappointed with how the GNWT handles tourism because they don't spend anything on promotion. To add five percent onto hotel rooms is putting the burden on us to do the job we expect them to do," said
He said a hotel tax would penalize travellers coming into the territory. Firth had another suggestion for the premier.
"Maybe he should take five percent out of his pension plan," he said.
One other suggested option is the implementation of either a harmonized sales tax (HST) or a retail sales tax (RST) to offset the budget imbalance. If the government went ahead with HST, it would mean an additional eight per cent tax on top of the current five per cent GST, for a total sales tax of 13 per cent paid by consumers at the cash register. An RST would mean an additional five per cent on top of the current GST.
Tourism might take a double hit if a proposed $30 airport fee goes into effect. The fee would be levied on top of any flight leaving the NWT.
Flights within the territory would not have the fee, but would be subject to a proposed eight per cent territorial sales tax.
David James, North Wright Air operations manager in Norman Wells, said he thinks any additional taxes on flights is going to hurt tourism.
"A PST is something the territories have been exempt from and it has been a selling feature so far but I guess we're going to drive some tourism away," he said.
Karen Boudreau, owner and operator of Wright's Home Hardware in Hay River, said a sales tax will take away any chance of remaining competitive so close to the Alberta border.
"I think it will cripple the retail business in the NWT," said Boudreau. "We're directly above Alberta so why wouldn't they go south? Especially in Hay River because it's only three hours to Alberta."
Boudreau said people in isolated communities will probably turn to the Internet for many of their purchases as a way of bypassing a territorial sales tax.
Barry and Betty Gauthier are in the process of moving to Inuvik from B.C. They said there is already a provincial sales tax in B.C. and the lower taxes in the NWT did have an influence on their decision to move to the North.
"The government takes money from every other angle and the cost of living is already high enough," said Barry.
The sales tax could have an affect on the Gauthier's decision to buy a house in Inuvik. The starting price for a well-maintained trailer is around $175,000. An eight per cent provincial tax would add $14,000 to that price.
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