A report was released recently outlining tax policy changes which could better Saskatchewan in terms of being competitive with other Western provinces in Canada.
At least that is the view of Jack Vicq, the Saskatchewan Director of the Canada West Foundation who were hired to create a report outlining the current situation and to identify potential reforms to enhance the Province's tax policy.
The report titled, 'A Tax Framework for Saskatchewan's Continuing Prosperity' has reforms which are staged for implementation over several years.
Vicq was in Yorkton last Tuesday speaking to a luncheon of the Yorkton Chamber of Commerce about the proposed reforms.
Vicq said in preparing the report the CWF undertook "the most extensive tax review" outside of government since 1965.
Vicq said when looking back even on the most recent 10-years, changes to taxes have been
significant with "almost $1 billion in shifts and changes," over that time.
However, the report does not dwell on what has already occurred.
"Really what we have done is look forward the next 10 (years)," said Vicq, adding their initial question was how competitive Saskatchewan's current tax policy was, and if it was found not to be competitive how that could be addressed by tax policy changes.
In the end Vicq said the report's strength is its forward look.
"I think the important message is it's a plan," he offered, adding the recommendations look to create " a tax regime that is simple and more transparent."
Vicq said the CWF report "doesn't try to pick winners and losers," but rather tries to identify changes which would make Saskatchewan "a good place to do business."
Vicq said the recommendations, if fully implemented would benefit almost every taxpayer in the province. Individuals would benefit through a reduction in personal income taxes, and homeowners and renters through lower property taxes.
Urban municipalities would gain through more transparent and timely property tax assessment practices.
Business owners would see reduced corporate taxes and tax policy which does not penalize growth.
Non-Residential property owners/lessee would notice reduced property taxes by putting a cap on the effective rate of tax.
And the Provincial Government itself would benefit through growth in overall revenues provided by expansion of business investment.
The finished report includes seven recommendations, the first of which Vicq said the government is well on its way to carrying out, transferring additional education funding away from property taxes to have it come from other provincial government sources.
"The Minster has said this will be done," he said.
Adjusting the impact of property tax is a major theme running through four of the recommendations.
The second would see the province establish a cap on the differential in the effective rate of tax for non-residential properties at 1.43 of residential properties. This would be a benefit to non-residential property owners and not affect agricultural land or residential property, explained Vicq.
Vicq said reasonably there is no reason the differential is not one-to-one, but the 0.43 reflects an income tax benefit.
"I think this is one of the most important recommendations," he said. "We believe it will have a significant impact on economic activity."
The cost to the province would be $135 million and it was recommended it be staged-in from 2011-2014.
Over the same timeframe it was recommended the province reduce the assessment cycle for all properties from a four-year cycle to a two-year cycle and simplify the program administration of the assessment process.
Vicq said the confusion associated with assessment, mill rates and tax categories could be eliminated by have the "tax expressed as a percentage of assessment value."
The cost would be $1 million for one-time transition costs.
A further property tax recommendation was targeted at the cities of Saskatoon and Regina. It called for capping the differentials in the effective rate of tax for non-residential properties at no more than 1.43 of residential properties. Other communities could as well, should the cap be expanded.
The report also recommended a change to personal income tax policy, explained Vicq.
The report calls for a move to a dual rate structure of 9 per cent and 12 per cent, down from three categories currently, beginning in 2013 and completed by 2018.
"This will benefit all taxpayers by reducing the amount of tax they pay, which in turn will retain and attract people to our province," stated the report, which also estimated the cost to the province at $525 million.
Vicq said there are those who question why not go to one rate of 10 per cent like Alberta, but he countered the recommendation offered "a more progressive tax" than it is now, adding only four per cent of current taxpayers in Saskatchewan would be in the higher tax category. He added "it matches up well with Alberta and B.C."
A sixth recommendation would benefit large banks, as it would eliminate the Corporate Capital Tax on financial institutions by 2018. This action would benefit any financial institutions who now pays the tax, explained Vicq, adding as it is now credit unions and some smaller banks already don't pay the tax.
The cost of this action would be $21 million.
The CWF also identified three options to consider for reforming the taxation of business and investment, said Vicq, who was quick to add "we did not recommend an HST (harmonized sales tax. It is one of the options to consider but not a recommendation."
In terms of changing the Provincial Sales Tax, Vicq said an option is harmonizing PST with GST at a provincial rate of seven per cent.
"Most provinces that have harmonized have harmonized at seven per cent, or higher," said Vicq.
If implemented the action should be done by 2017 and would increase revenue by $75 million, detailed the report.
A second option, the one supported by the CWF would reform the Corporate Income Tax by reducing the general rate to nine per cent and small business rate to three per cent. This would affect incorporated businesses.
It was suggested the action be done by 2017-2018 and would cost $232 millionThe final option would make changes to Corporate Income Tax by reducing the general rate to 10 per cent and the small business rate to 3.5 per cent, as well as providing PST offsets.
The third option is rather complicated, said Vicq, noting "you need to get the federal government to agree to PST offsets.
"This is not a simple solution to a competitive problem."
"We support and recommend Option B as it is the best option considering the political and public environment," stated the report.
The report was funded by the Saskatchewan Chamber of Commerce, the Institute of Chartered Accountants of Saskatchewan, Association of Saskatchewan REALTORS, Certified General Accountants of Saskatchewan and the Certified Management Accountants of Saskatchewan.
