Saskatchewan Premier Brad Wall says there will be tax increases in the provincial budget as part of the government’s three-year plan to balance the books.
It’s the first time Wall has put a timeline on the government’s effort to tackle a ballooning deficit that he now says could be about $1.3 billion.
“(If) we want to eliminate it in three years, we still then have to make very difficult decisions on the revenue and expenditure side – and we will,” Wall said Monday.
“We wanted to get to a balance. We wanted to have a transparent plan to get to balance … but also didn’t want to shock the
economy.”
The Saskatchewan government’s problem is falling revenue from oil, natural gas and potash. Wall said no one expected revenue from natural resources to fall more than $1 billion and stay that low for three years.
READ MORE: Premier Brad Wall hints that provincial tax changes coming in budget
But, he said, it looks like those lower prices are becoming the new normal.
“We need to take this opportunity, this challenging time, to begin to move away from an over-reliance on resource revenue,” said Wall.
“Some might say … that governments in Western Canada and resource-revenue-dependent governments should have been doing this a long time ago. Fair enough. We need, though, to start now and use what is a significant fiscal challenge to do it.”
Some of the shortfall is to be made up with tax increases. The budget is to be tabled Wednesday and Wall tried to prepare residents in a Facebook video post to Saskatchewan residents on Monday.
He said there will be a shift away from income taxes and toward consumption taxes.
The government also is looking at the education portion of property taxes, provincial sales tax exemptions and the PST in general. It also wants public-sector wages and benefits cut by 3.5 per cent.
“Everything was on the table and everything was considered.”
Associate professor of economics at the University of Regina, Jason Childs, said that even a small increase to the tax rate could result in millions of dollars in much needed revenue.
“A single percentage point increase in the PST is going to generate somewhere between $200-250 million for the provincial coffers,” Childs said.
In 2006, the previous NDP government lowered the provincial sales tax to five per cent from seven per cent. Some items are exempt, including restaurant meals, children’s clothing and used cars and trucks. The biggest exemptions can be found in industries like construction and agriculture.
Following the release of Wall’s video message, the Saskatchewan Construction Association (SCA) released a statement urging the government to leave the association exempt from a PST.
“As Saskatchewan would be alone in taxing construction labour in western Canada, this tax would be both a disincentive to invest and make the province less competitive with our neighbours.”
The Agricultural Producers Association of Saskatchewan (APAS) expressed concerns over consumption tax changes as well.
“The average total net farm income over the last ten years is just over 2 billion dollars,” the statement read.
“Removal of farm tax exemptions would cost our industry 380 million dollars. Because we don’t set our own prices, any increase in cost does not get passed on to our customers, it comes straight out of our bottom line, and this impacts the future of our industry, and the provincial economy as a whole.”
Interim NDP Leader Trent Wotherspoon said Wall is breaking promises he made to balance the budget and not raise taxes.
“The fact of the matter is, this premier and the Sask. Party couldn’t get the job done during the best days, during the years of
high oil and high commodity prices, record revenues flowing into government. They didn’t save a dime,” said Wotherspoon.
“They drained billions of dollars in the rainy-day fund.”
With files from Blake Lough
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