Government releases menu of tax options to boost revenue
Sales tax, sugary drink tax, carbon tax among new sources considered
Shane Magee
Northern News Services
Friday, March 4, 2016
SOMBA K'E/YELLOWKNIFE
The GNWT has released a list of new or increased taxes for discussion ahead of drafting its budget, but the potential changes would have a limited impact overall on the territory's fiscal crunch.
The GNWT has released a report outlining potential tax and fee hikes to help bring in more money. - Shane Magee/NNSL photo illustration |
The suite of options includes personal and corporate tax increases, hikes to fees on tobacco and alcohol, a sales tax increase, carbon tax and a sugary drink tax.
"While we can increase own-source revenues by raising taxes, fees and resource revenues, we have to be careful that the choices we make do not raise the cost of living for Northerners, discourage investment or shrink the NWT economy," finance minister Robert C. McLeod stated in a news release Tuesday.
Cabinet spokesperson Andrew Livingstone wrote in an e-mail cabinet takes no position on the proposals.
"The regular business planning process is still underway and it would be premature to discuss cabinet position," he wrote.
With each option comes a projected amount of money the tax or fee could bring in. Many of the options note that by increasing tax or fee rates, the territory could increase the cost of living and potentially cause people to look at moving away.
McLeod has said the government will need about $150 million in both spending cuts and revenue increases to stave off deficits in the coming years.
Government revenues are declining in part because of plummeting commodity prices, relatively flat population growth and a $10 million cut in its grant from the federal government. Almost 70 per cent of the GNWT's money comes from the federal government.
A new personal income tax bracket for those making more than $180,000 is projected to bring in $2.1 million. While considered an easy change, the downside is that it could drive away highly paid professionals.
Adding one percentage point to the corporate tax rate could raise $5 million but the paper warns that depends on corporate profitability.
A two per cent goods and services sales tax, added on top of the federal rate, is estimated to bring in $20 million. The report points out it would increase the cost of living and would particularly affect those living in small communities.
A new carbon tax, at $10 per tonne of carbon dioxide emissions could raise $10 million but would make it more expensive for businesses to operate.
A one percentage point increase on the three per cent payroll tax would raise $20.5 million.
Change the fuel tax rate to increase with inflation, which could see between $1.8 to $18.2 million raised for every one cent per litre above the current rate, which has been left unchanged since 1997.
Increasing tobacco taxes could raise about $2 million, though it comes at the risk of increasing illegal tobacco activity.
A hotel room tax could raise $3.3 to $3.5 million if set at five per cent of the hotel room cost.
A new sugary drink tax is considered, though the report states more study is needed to figure out if the cost of implementing the tax outweighs the money it could bring in.
Earlier this year, a committee of MLAs not in cabinet headed by Tu Nedhe-Wiilideh MLA Tom Beaulieu called on the government to use a "balanced" approach to its upcoming budget, meaning new revenue in addition to cuts.
The budget is expected to be tabled in the legislative assembly during the May/June sitting.
Livingstone said there won't be a pre-budget consultation tour by the finance minister as has been done in previous years. However, he wrote the GNWT is looking at other public engagement methods.
