TIME TO REVISIT HST
Speaking to reporters after delivering a belt-tightening budget that touched everyone from people on social assistance to school divisions, post-secondary institutions and health regions, Finance Minister Kevin Doherty said the government’s promised “transformational change” meant “We’re going to review all of our revenue sources.”
While his comment was in response to questions regarding the fate of the ongoing potash royalty review in the face of weak global prices, let’s hope that Premier Brad Wall’s government truly is serious about examining all aspects of Saskatchewan’s finances — including a willingness to expend some of its cache of political capital to explore a sensible tax measure it shelved without much discussion six years ago.
We are talking about Saskatchewan adopting a harmonized sales tax that would combine provincial sales tax with the GST and be applied to a wider array of goods and services that extends to currently PST-exempt items as restaurant meals, unprocessed foods and children’s clothing.
While British Columbia had to backtrack on the HST after that government’s deplorable handling of the entire process caused a public backlash, Saskatchewan can look to provinces such as Ontario, Newfoundland and Labrador, New Brunswick, Quebec and Nova Scotia that have harmonized their taxes with the GST, receiving federal financial support in the process. As respected economists such as Peter Phillips and Murray Fulton in Saskatchewan have pointed out — supported by a wide array of academics and think-tanks in Canada — the HST is a sensible and effective tax mechanism because it allows the government to collect tax revenues in the least expensive way possible, and doesn’t favour one sector of the economy over another. The impact on the poorest can be mitigated by expanding the existing tax credits to low-income households.
It also reduces the cost for businesses by requiring only one set of books and making it easier to export goods across the country. At a time when the Saskatchewan government is looking to further enhance its manufacturing sector and build exports, the ability to transfer input taxes to the end users more easily with an HST also should be attractive.
While no one likes to pay more taxes, a government that says it’s looking at all revenue options cannot afford to ignore an effective taxation policy even if it makes for some troublesome politics. If economic constraints are an opportunity to consolidate school divisions and health regions — and throw in rural governments for good measure — they also are an opportunity to introduce other potentially unpopular but needed reforms, such as a harmonized sales tax.