The clock is ticking on business tax reform
Author:
David Maclean
2006/01/12
It has been almost seven weeks since the Business Tax review Committee released its report recommending sweeping business tax reforms and we're still waiting for and implementation plan. In fact, the most we've gotten out of the government is a "maybe."
Maybe is not good enough. Do to a lagging economy, the primary function of our province is increasingly to train the workforce for searing hot economies in Alberta and British Columbia. Saskatchewan deserves better.
The headlines in the newspapers tell the story. As of now we have two pulp mills in financial jeopardy. The Prince Albert mill is due to close its doors in a few weeks. The Meadow Lake mill has filed for protection from its creditors (read: Saskatchewan taxpayers). The potential loss of these mills may cost hundreds of jobs in those communities and the loss of dozens of businesses that rely on the mill.
The Meadow Lake mill is a perfect illustration of the fallacy of NDP and Grant Devine's economics. For decades, successive governments maintained extraordinarily high business taxes and used those tax dollars to invest directly in select economic development projects. The biggest drawback of a "planned economy" is the very people who doing the planning. They don't make investments based solely on profit. The broth is spoiled by other motivations like "getting elected."
The Meadow Lake mill was the brainchild of Grant Devine in 1990. Over the years, through two different governments, the province dumped $275 million into the mill, but three write-downs have reduced the value of that investment to $78.8 million. Incredibly, the province in their infinite wisdom threw another $52 million into the swamp just eight months ago to buy the mill's debt owed to the Ontario Municipal Employees Retirement Board and Sun Life Assurance. Saskatchewan taxpayers are now the mill's only creditor. All in, that's a $327 million (not adjusted for inflation) "investment" into an asset that is of negligible worth.
A pretty steep price tag for holding a seat in Meadow Lake. Politics is one of the biggest reasons the mill has stayed open.
Saskatchewan's corporate tax structure wasn't solely responsible for the troubles in the mills, but it certainly didn't help. The Business Tax Review Committee found that Saskatchewan had the worst business tax regime in Canada. They also found that economic growth will follow dramatic reductions in business taxes. That means jobs for Saskatchewan.
And jobs are desperately needed in Saskatchewan. Statistics Canada data shows that Saskatchewan's total work force has shrunk by 9,000 workers. The government has run out of excuses to pull off the shelf. The cupboard is bare.
For years politicians have insisted that Saskatchewan is a competitive jurisdiction for running a business. And when the Canadian Taxpayers Federation and others make the case for business tax reforms, politicians like Eric Cline, Clay Serby and Eldon Lautermilch claim everything is great and present a jumble of statistics to "prove" their point.
The business tax committee blew their defense out of the water. In addition to finding that our corporate taxes are dramatically out of whack with other provinces, the committee recommends abolishing the corporate capital tax, reducing the corporate income tax rate and cutting taxes on small businesses.
It's time to drop the excuses and get on with building the Saskatchewan economy. Implementing the recommendations of the business tax committee are a good first step. Taxpayers should not have to wait for an election year to see action. It has been seven weeks and counting since the report was released. Maybe we'll get an answer soon.