MNL wants tax in­crease

Points to eco­nomic re­port, says it’s time to look at fi­nances

The Compass - - TRINITY SOUTH - BY ASH­LEY FITZPATRICK

Mu­nic­i­pal fis­cal frame­work are words that prompt a Pavlo­vian yawn from many of us. Yet, ac­cord­ing to Mu­nic­i­pal­i­ties New­found­land and Labrador (MNL) pres­i­dent Harry Hal­lett, we need to wake up and pay at­ten­tion to the sub­ject, as the frame­work is not enough to main­tain our mu­nic­i­pal­i­ties.

It says change is in the hands of the in­com­ing provin­cial govern­ment.

“ Since 1992, New­found­land and Labrador mu­nic­i­pal­i­ties have seen dras­tic re­duc­tions to their mu­nic­i­pal op­er­at­ing grants and, with­out new sources of rev­enue, the cur­rent tax sys­tem can­not pro­vide ad­e­quate rev­enue for ba­sic ser­vices like clean drink­ing water, waste man­age­ment and safe roads,” Hal­lett stated in an Oct. 4 news re­lease.

Along with the state­ment, MNL re­leased an eco­nomic re­port from Me­mo­rial Univer­sity of New­found­land econ­o­mist, Wade Locke, look­ing at op­tions for in­creas­ing rev­enues in the long term. Locke’s re­search was floated in brief at the 2011 MNL con­fer­ence in May, but the fi­nal re­port was not avail­able un­til this week.

Cit­ing the doc­u­ment, MNL is call­ing for a one per­cent­age point in­crease on the provin­cial per­sonal in­come tax rate. It says the in­crease can gen­er­ate an additional $116.5 mil­lion that could be down­loaded to mu­nic­i­pal­i­ties.

It all adds to an on­go­ing pub­lic pol­icy de­bate on mu­nic­i­pal sus­tain­abil­ity. How do we keep what we have, af­ford what we need, if cur­rent taxes are not enough, as many mu­nic­i­pal­i­ties have claimed?

A sim­plis­tic so­lu­tion would be to in­crease prop­erty taxes which are con­sid­ered vis­i­ble, trans­par­ent, pre­dictable and easy to ad­min­is­ter, Locke’s re­port states.

Mu­nic­i­pal­i­ties rely on prop­erty taxes for the bulk of their rev­enue.

How­ever, in New­found­land and Labrador there ap­pears to be a prob­lem with peo­ple pay­ing prop­erty taxes.

A 2007 MNL cen­sus sug­gests as much as 80 per cent of com­mu­ni­ties ran into prob­lems with tax delin­quents in 2006, “re­sult­ing in 78 per cent of (them) re­sort­ing to a col­lec­tion ser­vice.”

As well, as the re­port states, the prop­erty tax does not take into ac­count the abil­ity for a prop­erty owner to pay. A go-to ex­am­ple is the el­derly res­i­dent who feels forced into sell­ing their home and mov­ing, due to the fi­nan­cial pres­sure of ris­ing prop­erty tax paired with a fixed in­come.

Also, the pub­lic does not like prop­erty tax in­creases, tend­ing to vote out who­ever votes them in, Locke states, even in cases where there is a proven need for the additional rev­enue. En­ter the al­ter­na­tives. The re­port out­lines how mu­nic­i­pal­i­ties in this prov­ince might be given ac­cess to an in­come tax or a sales tax, or both. The point is to diversify where towns and cities get rev­enue.

He notes coun­tries such as Swe­den, Nor­way and Ger­many get 75 per cent or more of their lo­cal rev­enues from taxes from in­come, prof­its and cap­i­tal gains.

While di­ver­si­fi­ca­tion is per­haps a sim­ple idea, it is not so sim­ple in ex­e­cu­tion. Locke warns against po­ten­tially in­creas­ing in­equities be­tween re­gions, even in­di­vid­ual com­mu­ni­ties through vary­ing tax­a­tion. Pair­ing the additional taxes with some form of equal­iza­tion sys­tem is con­sid­ered.

Ad­min­is­tra­tive costs, Locke’s re­port states, can be avoided by piggy-back­ing the mu­nic­i­pal tax on the ex­ist­ing provin­cial tax.

The re­port takes a briefer look at other rev­enue-gen­er­at­ing op­tions, in­clud­ing the im­ple­men­ta­tion of or in­crease in: a gen­eral sales tax, grants-in-lieu of taxes, cor­po­rate in­come taxes, de­vel­op­ment charges, en­ter­tain­ment taxes, ho­tel and ac­com­mo­da­tion taxes, prop­erty or deed trans­fer taxes, busi­ness oc­cu­pancy tax, gas tax and user fees.

Ul­ti­mately, the chal­lenge is in de­ter­min­ing what will work as well for one com­mu­nity as an­other.

Ac­cord­ing to numbers pro­vided in the re­port, over a quar­ter ( 26.4 per cent) of the provin­cial pop­u­la­tion re­sides in one of 199 com­mu­ni­ties with pop­u­la­tions of 2,500 peo­ple or less. A grand to­tal of about 20 per cent of the pop­u­la­tion re­sides in the cap­i­tal.

As part of his 128-page re­port (more than 500 pages with ap­pen­dices), Locke quickly looks at MNL’s push to in­crease re­gional gov­er­nance.

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