McKenna wants lower taxes
Former premier says reform needed to keep N.B. thriving
FREDERICTON - Former Premier and TD Bank Deputy Chairman Frank McKenna says New Brunswick will need a major tax overhaul if it hopes to stay competitive in these uncertain economic times.
Speaking about a world economy that is evolving at warp speed, McKenna said he supports Finance Minister Victor Boudreau's willingness to consult with experts and New Brunswickers as he considers tax reforms to stimulate the province's economy.
However, McKenna did not mince words as he stressed the importance of a competitive tax system, while speaking to a breakfast crowd in the province's capital, yesterday.
When asked whether Boudreau should focus on re-organizing the tax system or striving for actual tax relief by lowering the overall tax burden, McKenna said both would offer the greatest advantage.
"Probably both in the perfect world," said McKenna, a former Canadian ambassador to the United States.
"But the Minister of Finance has to deal with the resources that he has, and I can't second guess him on that, but I think it's inspiring that he's taking expert help and doing a consultation process to try to re-jig the tax system."
The Liberal government raised taxes across the board in its first budget last year, breaking an election promise and infuriating business owners and residents who feel overburdened by taxes, rising energy rates, and skyrocketing property assessments.
McKenna said it is the speed at which other countries are cutting their taxes that is putting pressure on New Brunswick to keep up and do more to gain an advantage.
He said as a province with more modest natural resources and fewer natural advantages than other provinces and countries, New Brunswick needs to be creative and invest in its people.
McKenna highlighted the example of Scandinavian countries that were once thought of as more socialist than Canada and have gone to great lengths over the past decade to cut their business taxes from as much as 60 per cent to 28 in the case of Sweden, and 51 per cent to 28 per cent in the case of Norway.
"Iceland now collects more tax revenue from an 18 per cent rate than they used to from a 50 per cent rate. Ireland collects more now that its rate is down to 12.5 per cent than it did when its rate was up around 40 or 50 per cent," he said.
"All of these countries in the world that at one stage represented much higher tax rates than ours have all moved competitively in another direction, and we either get with the program, or we aren't going to be able to compete."
Boudreau had committed to meeting the federal government's challenge of decreasing the province's corporate tax rate from 13 per cent to 10 per cent, although government has yet to confirm when that would be implemented.
But despite those commitments, business leaders still walked away from the budget feeling as though their cries for tax relief aren't getting through to Boudreau or his department.
Local business people said the Liberals' budget represents a government stuck in neutral that is ignoring cash-strapped businesses struggling to hold off job cuts.
And the Canadian Taxpayers Federation attacked Boudreau for spending the large surplus generated by last year's tax hikes -- which were originally justified by what the Liberal government claimed to be an impending deficit -- rather than returning it in the form of tax cuts.
McKenna said he supports the fact that Boudreau has expressed openness to moving tax burden away from income and business taxes and toward consumption taxes like the HST.
"He's right in saying we need to make a shift to consumption taxes over personal and business taxes," said McKenna.
"In fact the government of Canada, I think, made a grievous mistake in doing the GST cuts and not doing the personal and corporate income tax cuts."
McKenna said the province's move to the HST offers it the flexibility it needs to tinker with the tax which the federal government has cut by 2 per cent since taking power.
Boudreau is on the record as saying tax reform won't necessarily equate to tax relief.
"Maybe at the end of the day certain taxes could drop, maybe certain (taxes) could increase, maybe it will be the status quo," said Boudreau after announcing the tax reform discussion paper that will be released in April.
"This is what this whole exercise will do."
The process, which will involve a legislative committee that will present its recommendations in the fall after holding consultations over the summer, will focus on all aspects of the taxation system including personal income tax, corporate tax, property tax, consumption tax, and fuel tax.
Boudreau said he intends to introduce tax reform measures by next budget despite the calls from the business sector for more immediate relief.
The recent auditor general's report stated the province is collecting tax dollars at an unprecedented, and perhaps unnecessary, rate.
Business New Brunswick Minister Greg Byrne said taxes will be looked at comprehensively.
"The whole purpose of that dialogue will be to look at the various options, and to decide what options would be best, and it may not just mean a change to one area of the tax system, it may very well involve a change to many areas of taxation," he said.
"We also have the Finn report we can expect on local governance, which will also deals with municipal taxation."
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