Vicq issues loud wake-up
call
The StarPhoenix (Saskatoon)
Fri 25 Nov
2005
Page: A14
Section: Forum
Byline: Murray Mandryk
Column:
Murray Mandryk
Source: Saskatchewan News Network; Regina Leader-Post

In a world where we've grown numb to blockbuster reports
on governments, the report of the Saskatchewan Business Tax Review Committee
wasn't about to create shock waves.

A report that recommends provincial corporate tax reforms simply won't create
the buzz of a report from Auditor-General Sheila Fraser, or Justice John Gomery
on the tawdry activities of crooked Liberals.

Let's face it. Tax reform simply isn't sexy, especially in its buttoned-down,
three-piece business suit corporate variety. But as far as indictments go, the
one on corporate taxes in Saskatchewan was a pretty damning one.

What chair Jack Vicq and his committee have produced is not only a pretty
good synopsis of what's been wrong with the current government's taxation
policy, but also what's been wrong in Saskatchewan for a long time -- even
before the NDP regained power in 1991.

And it also does a pretty good job of warning us not to repeat past mistakes
-- something we would be doing if the government again follows the misguided
advice of the restaurant association to cherry-pick recommendations in this
report.

In fact, the Vicq committee's articulate assessment nicely goes beyond the
usual self-pitying "we just can't compete with Alberta" whine, and explains how
we can do just that.

In a nutshell, the committee recommends the following:

- The general corporation capital tax (CCT) rate of 0.6 per cent be
eliminated for all corporations, except Crowns;

- The CCT surcharge imposed on resources be converted, in a revenue neutral
way, to a royalty;

- The corporate income tax (CIT) rate be reduced to 12 per cent from 17, with
a further reduction to 10 per cent when it's viable to do so;

- Hiking the "small business" threshold -- the net income below which the
lowest corporate tax rate of five per cent applies -- to $500,000 from $300,000.
This means companies that earn between $300,000 and $500,000 are spared the
burdensome tax rate of 17 per cent;

- The existing investment tax credit (ITC) for manufacturing and processing
capital acquisitions be made refundable, and;

aThe province reduce its PST of seven per cent to five per cent, and
harmonize it with the GST to include things such as restaurant meals.

Again, short of seeing a tax on things like restaurant meals (the Vicq
committee, also suggests that reading material be the one thing excluded from
harmonization), you might be inclined to think that this doesn't much affect
your world.

Actually, it does.

In fact, it has for a few decades, which is all part of the Vicq committee's
compelling argument as to why these recommendations should be implemented.

In the course of its work the committee, which includes chartered accountants
Charlie Baldock and Cheryl Shepherd, uncovered some startling numbers on just
how burdensome the current tax regime is for Saskatchewan businesses.

Comparing the province's business tax load with other jurisdictions,
Saskatchewan companies pay 17 per cent more than the national average --
second-highest in Canada, and only behind Manitoba businesses that pay 20 per
cent more. By comparison, Alberta is at 53 per cent of the national average, but
New Brunswick, Nova Scotia and Newfoundland and Labrador all are well below the
average at 49, 61, and 63 per cent, respectively.

The committee also points to a C.D. Howe Institute report of September that shows Saskatchewan
has the highest marginal effective tax rate in Canada. (METR compares the
relative impact each tax has on a business's decision to invest in a particular
region.)

Again, the interesting aspect of this arbitrary assessment isn't so much that
Alberta's METR of 31.8 per cent is much lower than Saskatchewan's 44.1 per cent.
Rather, it's that Newfoundland's rate of 20.1 per cent is lowest, and New
Brunswick's 22.5 per cent rate is second-lowest.

As you can see by the fine work by the three committee members, the simple
reality isn't just that we're not competitive with Alberta. We are struggling to
compete with the Atlantic provinces in trying to attract business.

Vicq put it best: "We don't even get on the radar on some investments because
our taxes are so high," he said.

The problem is a culture of high corporate taxes and tax incentives that
target specific sectors such as the film industry, Vicq explained.

Lest anyone think this was a complete and total condemnation of government
policy, Vicq made two other very important points.

First, the financial situation of the province prior to 2002 -- when he was
still examining personal income tax reforms -- simply wouldn't have allowed the
sweeping corporate tax reform the committee now advocates.

Second, the problem of targeting tax breaks only for specific industries goes
back to the Grant Devine era, when the Progressive Conservatives were equally
eager to pick winners and losers.

Of course, one can expect the usual resistance in Saskatchewan to change.
Already, the restaurant industry is digging in its heels and making it known it
will resist the implementation of the Vicq report as it most affects that
sector. But the simple fact is that this report has to be seen not just as a
blueprint on how to grow this province, but as a wake-up call to what might
happen if we don't.

Many might not see the Vicq report for the bombshell that it is. They should.

Edition: Final
Story Type: Column
Length: 885
words