May 2006 Archives

GST rate cut takes effect July 1, 2006

In the federal budget announced May 2, 2006, the federal government followed through with its promise to cut the GST rate from seven per cent to six and the HST rate from 15 per cent to 14 starting July 1st, 2006.

Changing the rate may be a simple process for small businesses (using simple systems or more manually-based processes in which they can override the default tax amount), larger businesses may not be so lucky. Many face more serious challenges in reprogramming their systems.

For more information on applying the rate reductions for July 1st, 2006, businesses may want to consult the Canada Revenue Agency's questions and answers at:

http://www.cra-arc.gc.ca/agency/budget/2006/gstrateqa-e.html

Tax Cuts and the "Fiscal Imbalance"

The Canadian Centre for Policy Alternatives (CCPA)this week released Tax Cuts and the "Fiscal Imbalance," by CCPA Senior Economist Marc Lee.

From the CCPA news release:

This new study warns that solving the alleged "fiscal imbalance" runs the risk of becoming a downsizing exercise for the federal government.

The study, authored by CCPA Senior Economist Marc Lee, breaks the "fiscal imbalance" code. Different definitions of the term "fiscal imbalance," in a context of federal-provincial fights over cash and partisan politics, have muddied the waters of the debate.

"The term 'fiscal imbalance' is a loaded one," says Lee. "It is a pejorative term that implies that balance must be restored. But a careful look at Canadian history and other federations worldwide suggests that Canada does not have deep structural problems that need to be fixed."

To date, the issue has revolved around provinces seeking more money from Ottawa. The report warns that, in its current incarnation, more radical decentralization measures could be put on the table due to pressure from influential lobby groups, like the Canadian Council of Chief Executives.

"Missing from the story is tax cuts and tax competition," Lee adds. "Provincial governments undercut their fiscal positions through tax cuts over the past decade. The decentralization push hinges around deep federal tax cuts to pay for the elimination of federal transfers for health care, post-secondary education and social welfare."

The complete report can be downloaded from the CCPA's web site: http://www.policyalternatives.ca

CTF Launches 8th Annual Gas Tax Honesty Campaign

New budget data shows federal government’s roadway spending is up.

Taxpayers Federation repeats call for Ottawa to dedicate 50% of gas taxes to roadway development and for gas tax cut of 5 cents/litre.

Harper Government in full retreat from gas tax relief promises.

Ottawa: The Canadian Taxpayers Federation (CTF) today launched its 8th annual Gas Tax Honesty Campaign, marking Gas Tax Honesty Day. The yearly campaign kicks off the summer travel season for Canadian motorists.

The CTF began its Gas Tax Honesty Campaign in 1999 to inform Canadians of the gasoline taxes they pay at the pumps (see gas facts, below, for updated figures), to ensure gasoline taxes are dedicated toward roads, and to pressure Ottawa to cut gasoline taxes not spent on road construction. In 2002, the CTF proposed a Municipal Roadway Trust – a practical model for returning half of federal gas tax revenues directly to municipalities to spend on roads and highway development and maintenance. The 2006 report is available at www.taxpayer.com.

In addition to implementing a MRT-style model, the CTF is calling on Ottawa to eliminate the 1.5 cent/litre “deficit elimination tax” as a first step; stop taxing taxes by removing the GST (and HST where applicable) charged on federal and provincial gas taxes; and reduce the federal levy an additional 2 cents. These three measures would reduce the gas tax bite by 5 cents a litre. To date, the CTF has delivered more than 150,000 petitions to Parliament Hill demanding lower and dedicated gas taxes. (On October 5, 2005, then-Opposition leader Stephen Harper accepted 35,000 of these petitions.)

This year’s gas tax report – entitled Gas Taxes: Promises Made, Promises Unkept – highlights past problems with Ottawa’s gas tax sharing schemes, notes the continued gouging of consumers as gasoline prices soar, and details the Harper government’s election promises.

“Past gas tax transfer deals miss the mark by making the construction and maintenance of roads, highways and bridges a secondary priority,” said federal director John Williamson. “The government should be commended for dedicating a greater percentage of gas tax revenues to roadway spending. Now they need to make good on their election promise to renegotiate the so-called New Deal with cities so that roadways are made a priority, and gas tax dollars are spent on road construction and maintenance.”

On gas taxes the Conservative government is in full retreat from commitments repeatedly made in opposition. “Stephen Harper vowed to reduce the gas tax bite, and we believe a promise made in opposition should be a promise kept in government,” continued Williamson. “As record-high gas prices pump unanticipated millions of dollars into federal coffers, it is time to give some of that money back to taxpaying motorists who are running on empty.”

Canadian Gas Facts –

Over the past 12 months – the period of May 2005 to April 2006 – the average cost of a litre of gasoline paid by Canadian motorists was approximately 96 cents. This represents a 12-cent increase over last year’s average price. Taxes account for an average 35% of the pump price. Gasoline prices have now jumped to a weekly average price of over $1 per litre in every region of the country.

Of the $5.2-billion collected in federal gasoline and diesel taxes in 2005/06, Ottawa will spend 17% or $882-million on actual road and highway construction and maintenance.

In addition, GST is charged on the full pump price, gasoline taxes included. It is a tax-on-tax. As the pump price increases so too does the GST. Two years ago, the federal government collected $1.4-billion in gasoline GST revenues. For every 10 cent increase in the price of gasoline, Ottawa’s GST revenues rise by $175-million. Due to soaring gas prices, Ottawa will collect $1.8-billion in GST from gasoline in 2005/06, up $400-million over the previous year.

As a deficit reduction measure in 1995, Ottawa increased the federal gasoline tax from 8.5 to 10 cents per litre. The deficit was vanquished eight years ago, but the tax remains and the federal government’s gouging at the pumps continues even with multi-year, multi-billion dollar federal surpluses.

Despite a greater investment in roadway construction and maintenance, the new government is in full retreat from commitments to reduce gas taxes. On August 18, 2005, then-Opposition Leader Stephen Harper blasted the Liberal government for refusing to reduce gas taxes as prices soared. “There’s no reason for the federal government to profiteer when consumers are hurting,” he said urging the previous Liberal government to give motorists a break. “This is causing considerable dislocation. There are a lot of people on fixed incomes. There are a lot of businesses on thin margins that are going to be affected by this.”

In opposition, the Conservatives made repeated promises to remove the GST tax-on-tax bite and pledged to remove the GST completely when gasoline prices exceeded 85 cents per litre.

The Conservative platform committed the government to expand the New Deal to allow all cities and communities – including cities with more than 500,000 people – to use gas tax transfer dollars to build and repair roads and bridges to improve road safety and fight traffic congestion.

In 2003, Canadian municipalities spent $6.4-billion building and maintaining roads. More than eighty per cent of all roads in Canada are municipal roads.

John Williamson
Federal Director
Canadian Taxpayers Federation

Gun Registry Still a Billion Dollar Boondoggle

Recall the Original Promise to Taxpayers – Ottawa’s firearms registry was to cost a grand total of $2-million, not $80-million every year

Ottawa – The Canadian Taxpayers Federation (CTF) reacted to the report tabled by Auditor-General Sheila Fraser this afternoon in the House of Commons. This audit reviews the federal government’s management (or lack thereof) of tax dollars related to military recruitment and training, the collection of tax debts, the distribution of grants, the management of programs for Aboriginal Canadians, and ongoing problems with the Canadian Firearms Program. In addition, Ms. Fraser outlined how rising gun registry costs were not reported to Parliament, thwarting the constitutional duty of Members of Parliament to oversee and approve the spending of tax money.

“The auditor-general found the Canada Firearms Centre made progress in disclosing its spending. However, she also found that whenever gun registry costs ballooned beyond what Parliament had authorized, or above what the government had publicly promised, the true amounts were hidden from legislators and the public,” said CTF federal director John Williamson. “This represents a serious breach of Parliament’s constitutional authority to approve program spending.”

When the federal firearms registry was established in 1995, the CTF adopted a wait-and-see attitude towards the program. That year, the federal government estimated the registry would cost $119-million to establish but recoup $117-million through firearms license fees for a net cost to taxpayers of $2-million. Today’s report reaffirms the total program cost at the end of 2004 was $1.045-billion with only $99-million collected in fees. This colossal cost explosion has taxpayers on the hook for $946-million, and Ottawa will spend another $82-million in 2005 and $83-million more in 2006.

“Canadians have no problem with government spending a billion dollars on a program if it delivers results, but the firearms registry fails to do this. The costs have exploded, statistics show the registry has had no measurable impact on reducing gun-crime, and now Ms. Fraser reports Parliament was again kept in the dark,” said Williamson. “Ottawa’s handling of the gun registry is a textbook example of public administration at its absolute worst. It is a fiscal crime committed against taxpayers. Forcing duck hunters and farmers to register their long-guns will not reduce crime. It is past time to shoot this registry down.”

The CTF is calling on the Conservative government to –

1. Table legislation to abolish the long-gun registry;
2. Immediately cut the program’s annual funding; and
3. Issue an amnesty for gun owners to stymie the registry bureaucrats responsible for issuing a letter to police informing them to arrest citizens that fail to comply with the registry.

John Williamson
Federal Director
Canadian Taxpayers Federation

Child Care Allowance

Ottawa’s $1,200 Child Care Allowance Good for Families
Government Must Stop Funding Daycare Special Interest Groups

Ottawa: The Canadian Taxpayers Federation (CTF) reacted to today’s announcement made by Human Resources & Social Development Minister Diane Finley that Ottawa will move quickly to enact the new Universal Child Care Benefit plan. The 2006 Budget confirmed the Conservative government will provide all families with an annual $1,200 allowance for each child under the age of six (which will be taxed in the hands of the spouse with the lower income).

“The child care allowance means Canadian parents will have more money in their pockets to help with the costs of child rearing. The allowance means parents will have more choice to determine how best to raise their kids,” said CTF federal director John Williamson. “It is better parents have that money than institutional daycare providers.”

A universal child income tax credit/payment was proposed by the CTF in its 2006/07 pre-budget presentation to the House of Commons Finance Committee in October, 2005.

“The previous government’s daycare program was flawed because it passed money from politicians in Ottawa to other politicians in provincial capitals,” added Williamson. “It put the priorities of bureaucracies and daycare providers ahead of Canadians families.”

End Government Financing of Political Advocacy Groups –

The CTF is concerned the federal government has not moved to cut Ottawa’s funding of advocacy groups, and specifically, organizations that spend tax dollars to urge politicians adopt an institutional daycare scheme.

“Today, the CTF is calling on the federal government to review its funding of third party advocacy organizations,” said Williamson. “Each year Ottawa spends between $6-billion and $8-billion bankrolling the activities of special interest groups, non-government organizations and third party groups. Many of them use tax dollars to lobby Ottawa and the public to support their political objectives. This must stop. Organizations or citizens that wish to influence public policy should solicit voluntary financial support from Canadians and not do so with tax dollars. Ottawa must not compel taxpayers to support political advocacy work.”

John Williamson
Federal Director
Canadian Taxpayers Federation

Why Are Personal Income Taxes Going Up?

Income taxes to increase to 15.25% this year and 15.5% in 07’
A 6% GST is a welcome start, but more tax relief needed
Program spending up 5.3% this year and 4.1% in ’07
Nothing to lower gas taxes or abolish the gun registry

Ottawa: The Canadian Taxpayers Federation (CTF) reacts to the 2006/07 federal budget, which was tabled in the House of Commons by Finance Minister Jim Flaherty this afternoon.

Tax Relief for Canadians –

“The bottom line for average taxpayers is a net benefit in 2006 and larger tax savings in 2007. Yet the federal government’s lowest personal income tax rate will rise. In 2005 it was set at 15 per cent and applied to the first $35,595 of income. The Conservative’s first budget will see this rate increase to 15.25 per cent this year and to 15.5 per cent in 2007,” said CTF federal director John Williamson. “So while the GST is being cut by one point, income taxes paid by ordinary Canadians will go up.”

“The one group that will benefit immensely from this budget is Canadian households with young children,” noted Williamson. “Economically, they will rocket ahead thanks to the government’s fulfilment of its promise to provide all families with $100 a month for each child under age 6.”

Federal Finance Department briefing documents prepared for Finance Minister Flaherty state that Canada’s “personal and corporate income tax burden are the highest among the G7 countries.”

“Budget 2006 does take steps to reduce a series of regressive corporate taxes, particularly on small and medium businesses,” said Mr. Williamson. “The measures include immediately abolishing Ottawa’s capital tax, eliminating the corporate surtax in ’08, and reducing the general business tax rate to 19 per cent from 21 per cent by 2010. Yet this government should have moved to bring down personal income taxes. This will need to be the top priority for the 2007 Budget.”

Gas Taxes –

In August, 2005, then-Opposition leader Stephen Harper blasted the Liberal government for refusing to reduce gas taxes as prices soared. “There is no reason for the federal government to profiteer when consumers are hurting,” he said urging the previous Liberal government to give motorists a break. “This is causing considerable dislocation. There are a lot of people on fixed incomes. There are a lot of businesses on thin margins that are going to be affected by this.”

“The price of gasoline has skyrocketed. Last week the national average price was over $1.00 per litre,” noted Williamson. “Despite the Prime Minister’s promises to reduce gas taxes, there is nothing in the budget to accomplish this goal. This is a disappointment.”

The Debt & Surplus Picture –

“We are pleased Minister Flaherty will reduce Canada’s monster debt by $8-billion last year and another $3-billion this year,” Williamson stressed. “Unfortunately the government will not implement a legislated debt reduction schedule. Debt servicing will chew up $35-billion this year, which amounts to $95-million each day. Ottawa should set yearly debt reduction targets as was done with the deficit and make those targets the law.”

Overall Size of Government to Increase due to Modest Spending Growth –

“Ottawa’s program spending growth will increase by 5.3 per cent this fiscal year to $189-billion, and another 4.1 per cent in 2007 topping out at $196-billion,” said Williamson. “If the government is capable of reducing spending in its non-priority areas and holding growth in others, the Conservatives will be able to offer broadly-based income tax relief in next year’s budget.”

What About Eliminating the Gun Registry?

In 1995, Canadians were told by Ottawa that the federal gun registry would cost $2-million and there would be no substantial cost to taxpayers due to registration fees. In 2003, the Auditor-General stopped an audit due to incomplete information and predicted the registry would cost taxpayers $1-billion. The price of registry is on track to exceed $2-billion.

“The Harper government needs to abolish the gun registry,” concluded Williamson. “If it does not have the necessary votes in the House of Commons to do so, it should cut off the program’s annual funding allowance and starve it instead. ”

John Williamson
Federal Director
Canadian Taxpayers Federation

2006 Federal Budget

Minister of Finance Jim Flaherty presented the 2006 federal budget, the first by a Conservative government in thirteen years, that proposes tax cuts and pays down debt.

The budget purports to deliver $20 billion in tax relief over two years. Some of the highlights include:

- a one-point reduction to the GST, effective July 1, 2006
- targeted tax measures to help Canadians with the cost of tools, textbooks, transit passes, and childrens' sports.
- $3.7 billion over two years for the new $1,200 Universal Child Care Benefit
- $1.5 billion more this year for agriculture.
- $1.4 billion more this year for policing, border security and public safety.
- $1.1 billion more over two years to rebuild the Armed Forces.

For all Budget 2006 information, see the Department of Finance Canada website at:
http://www.fin.gc.ca/budtoce/2006/budliste.htm

Alternative Federal Budget

The Canadian Centre for Policy Alternatives (CCPA) has released its 2006 Alternative Federal Budget, entitled "Alternative Federal Budget 2006: Moving Forward". According to the CCPA:

"This year's AFB demonstrates how the federal government has the resources to maintain and build on the commitments made in the 2004-05 minority Parliament and use upcoming surpluses to move forward on a progressive agenda."

"The AFB argues that Canadians will be much better served by investing the surplus into a range of public services that address the most important problems facing the country today."

The news release and the entire alternate budget document are available on the CCPA web site at http://www.policyalternatives.ca.