Provincial Tax on Municipalities Unfair

Thursday, March 08, 2012 - 4:15 AM

The City of St. John's is calling upon the provincial government to halt its practice of charging municipalities HST.

In 2011, the provincial budget stated that the Department of Municipal Affairs would undertake a review of the Municipal Operating Grants formula. In recent days, Premier Kathy Dunderdale has indicated that this will not be addressed in the upcoming 2012 provincial budget.

The City has stated very clearly that municipal operating grants is only one factor in the new provincial-municipal fiscal relationship the City is seeking and one of the biggest issues facing municipalities in this province remains the HST clawback, which has also been addressed by Municipalities Newfoundland and Labrador.

"It is fundamentally wrong, unfair and inequitable that the provincial government forces municipalities to pay Provincial HST on the essential services we provide our residents," says Mayor Dennis O'Keefe. "The provincial government does not pay GST to the federal government and they don't pay HST to the province. The federal government also does not require municipalities to repay Federal HST. In fact, in most jurisdictions across Canada the provincial government fully or partially rebates the HST to municipalities, but not in Newfoundland and Labrador. This needs to stop now. Throughout the province, the City estimates that municipalities collectively pay between $25 and $30 million annually to the provincial government in taxes."

The City has met with the province regarding its position paper 'Towards a Balanced Provincial-Municipal Fiscal Relationship and Municipal Sustainability' on multiple occasions and also recently presented it again during the provincial budget consultations. The City has not received any substantive response from the government on any of the positions presented to date. And while the City has been told that work on a new Municipal Operating Grant formula are well advanced within the Department of Municipal Affairs, the City has never been consulted and to our knowledge neither has Municipalities Newfoundland and Labrador.

"The positions we have advanced to the province are about creating a long-term, sustainable and predictable fiscal relationship," says Ward 1 Councillor Danny Breen, Chair of the Finance and Administration Standing Committee. "We are fortunate to have a $10 million surplus for the 2010 financial year, however with our annual expenditures exceeding $200 million, a one-time windfall of $10 million is not extraordinary by any means. I need only point to the Government of Newfoundland and Labrador to illustrate how quickly one can move from a surplus to a deficit position and given our dependence on property tax as our primary source of revenue municipalities are even more vulnerable to sudden shifts in prosperity.

"We understand that what we have advanced to the province cannot be completed in a year," adds Councillor Breen. "But we do expect to see a meaningful start in the 2012 provincial budget and also expect to be consulted on further measures for 2013 and beyond."

Click the following link for a copy of the City's full position paper:
Towards a Balanced Provincial-Municipal Fiscal Relationship and Municipal Sustainability

For further information:
Jennifer Mills
Communications Officer
Phone: 709-570-2037
Cell: 709-690-7586

Dennis O'Keefe
Phone: 709-576-8477
Cell: 709-685-5657

Danny Breen
Ward 1 Councillor
Chair, Finance and Administration Standing Committee
Phone: 709-576-2332
Cell: 709-687-9513