Business representatives, MLAs speak out against proposed heavy machinery tax

N.B. law amendments committee begins hearing on proposal to remove tax exemption for heavy machinery
The motion to remove tax exemption came from Saint John Harbour MLA Gerry Lowe who says industry must pay its share of taxes. Silas Brown explains.

The committee on law amendments began a hearing Wednesday, which examines a proposal to remove tax exemptions from heavy machinery.

Saint John Harbour MLA Gerry Lowe, who has been fighting for similar measures since his time on Saint John council, brought forward the proposal, but as a non-binding motion with little government support it will face an uphill battle.

“I, as a councillor for five years, don’t think that heavy industry is paying its fair share in Saint John, and this will prove one way or the other but it still doesn’t mean the government will make a change,” he said after the first morning of presentations.

But the committee hearing had only just gotten underway when finance minister Ernie Steeves said that he does not support the proposal while unveiling the government’s first quarter fiscal results across the street at Chancery Place.

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READ MORE: N.B. employers slam proposed legislation to tax heavy industry machinery and equipment

The atmosphere inside the committee room was not much friendlier. Government house leader Glen Savoie said that a machinery tax would effectively amount to a tax on capital investment. As businesses invest in replacing depreciating equipment or machinery their tax bill would rise.

“I believe this is regressive, I believe this would hurt New Brunswick business and the New Brunswick economy and ultimately the province’s ability to pay for the services that our taxes go towards,” he said.

Currently Alberta is one of the few provinces to have some sort of machinery tax, but the main population centres of Edmonton and Calgary are exempt. Nova Scotia adopted the measure in the 1990s but abandoned it due to concerns over lagging growth and competitiveness.

Day one’s schedule featured a host of business representatives who do not favour the proposal and a theme quickly started to emerge: worries over keeping competitive.

“At a certain point in time you reach a stage where you are anti-competitive, you are not able to compete from the jurisdiction that you are in. You’re absolutely correct, you’re not going to move a pulp mill, so what happens, as it does in many other industries is you shut down because you can’t compete,” said J.D. Irving’s director of government relations Chris MacDonald.

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Ron Marcolin of Canadian Manufacturers and Exporters said a tax on equipment would be a dagger to the province’s manufacturing sector.

“It would kill jobs,” he said.

“The fact of the matter is the supply chain would be decimated, people would leave the province, and no net new investment would come to the province because of course there are cheaper jurisdictions that quite frankly could do the same work.”

Representatives from the finance department and Service New Brunswick expressed their concerns about the proposal. They said tax revenues would likely be boosted in the short term but begin to fall as investment is taken outside of the province.

READ MORE: Government could earn up to $6B a year with changes to small business tax law: watchdog

Service New Brunswick assessor Steve Ward also walked committee members through the process of how industry buildings are valued. Assessors attempt to determine the real estate value of the land and the buildings on an industrial propery and do not take into account the value of the product being produced which impacts the overall value of the business, not it’s property tax value.

Yet industrial site’s property tax value is still sensitive to external market forces. For example in 2013 Service New Brunswick slashed the assessed value of the pulp mill in west Saint John by about half due to lessened demand for paper products.

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Green Party leader David Coon was left asking why industrial properties took into account these kinds of external factors while residential properties do not.

“I’m concerned about the valuation criteria that allows Service New Brunswick to take into account the markets that heavy industry is selling into,” he said.

“If a homeowner falls on hard times, that’s not taken into consideration in terms of their property, into the valuation of their property. You know they lose their job, their valuation doesn’t go down on their house.”