More Restrictions on Raising Taxes in Canada
Ontario, Canada's dominant province and "the economic engine of the country", has introduced a Balanced Budget and Taxpayer Protection Act. This legislation will impose restrictions on raising tax rates or introducing new taxes, as well as encouraging governments to run surpluses in good years. The net effect will be greater certainty in government actions and reduced tax volatility.
Balanced Budgets
The law, currently in Bill form, is designed to protect Ontario families and those conducting business or investing in the province from irresponsible government spending that results in deficits and accumulating debt. It provides personal penalties to the Premier and members of the Cabinet in any year in which a deficit occurs.
The Ontario legislation contains provisions similar to the province of Manitoba's benchmark legislation on balanced budgets. One of these provisions encourages governments to run surpluses in good years, because an accumulated net surplus - the surplus of revenues over expenditures for the previous three fiscal years - could be taken into account to offset amounts by which expenditures exceed revenues in a given fiscal year.
After the first year of a deficit, the Premier and Members of Cabinet would be docked 25% of the stipend they receive for their work as Cabinet members. The penalty would rise to 50% after a second consecutive deficit and for each consecutive deficit thereafter.
While governments would be expected to plan balanced budgets, this Bill would give Cabinet the opportunity to fix a very small deficit - less than 1% of revenues - by running an equal or greater surplus the following year. In this situation, Cabinet salaries would not be docked unless the government fails to run an offsetting surplus the following year.
If the government runs a deficit greater than 1% of revenue, the penalties would apply immediately after the tabling of the Public Accounts.
Taxpayer Protection
If passed, this Bill would require the government to get the approval of voters before it could introduce a new tax or raise rates of a wide range of taxes. This would apply to personal income tax, corporate taxes, retail sales tax, employer health tax, gasoline and fuel taxes, and education property taxes. Voter approval would be required, except in situations such as when any new or increased tax:
Voter Approval
If the government wants to seek voter approval through a referendum to authorize a tax rate increase or a new tax, this Bill would require a clear, concise impartially-worded question capable of a yes-or-no answer and an estimate of the revenue impact of the proposed increase or new tax. The vote would be held under rules similar to those for provincial election campaigns.
Alternatively, provincial political parties could seek voter approval through a general election, by filing an official notice of their intent to raise tax rates or to impose new taxes if elected. If a party that filed such a notice is elected, it can implement its plan without a referendum. Once again, the statement of intent to increase tax rates or to impose new taxes must be clear and concise, so voters know exactly what they are being asked to approve.
Many Canadians are recommending that now, while our national government in Ottawa is running annual surpluses, is the opportune time for the enactment of similar federal legislation. Such action, together with the tax decreases anticipated to be announced in the 1999 budget, would significantly enhance Canada as a place to live and conduct business.
The information provided herein is for general guidance on matters of interest only. The application and impact of laws, regulations and administrative practices can vary widely, based on the specific facts involved. In addition, laws, regulations and administrative practices are continually being revised. Accordingly, this information is not intended to constitute legal, accounting, tax, investment or other professional advice or service.
While every effort has been made to ensure the information provided herein is accurate and timely, no decision should be made or action taken on the basis of this information without first consulting a PricewaterhouseCoopers LLP professional. Should you have any questions concerning the information provided herein or require specific advice, please contact your PricewaterhouseCoopers LLP advisor, or:
For further information on taxation in Canada, enter a text search "PricewaterhouseCoopers" and "Canada" and "Mondaq Business Briefing".
Visit our website at Click Contact Link
PricewaterhouseCoopers LLP is a Canadian member firm of PricewaterhouseCoopers International Limited, an English company limited by guarantee.
Ontario, Canada's dominant province and "the economic engine of the country", has introduced a Balanced Budget and Taxpayer Protection Act. This legislation will impose restrictions on raising tax rates or introducing new taxes, as well as encouraging governments to run surpluses in good years. The net effect will be greater certainty in government actions and reduced tax volatility.
Balanced Budgets
The law, currently in Bill form, is designed to protect Ontario families and those conducting business or investing in the province from irresponsible government spending that results in deficits and accumulating debt. It provides personal penalties to the Premier and members of the Cabinet in any year in which a deficit occurs.
The Ontario legislation contains provisions similar to the province of Manitoba's benchmark legislation on balanced budgets. One of these provisions encourages governments to run surpluses in good years, because an accumulated net surplus - the surplus of revenues over expenditures for the previous three fiscal years - could be taken into account to offset amounts by which expenditures exceed revenues in a given fiscal year.
After the first year of a deficit, the Premier and Members of Cabinet would be docked 25% of the stipend they receive for their work as Cabinet members. The penalty would rise to 50% after a second consecutive deficit and for each consecutive deficit thereafter.
While governments would be expected to plan balanced budgets, this Bill would give Cabinet the opportunity to fix a very small deficit - less than 1% of revenues - by running an equal or greater surplus the following year. In this situation, Cabinet salaries would not be docked unless the government fails to run an offsetting surplus the following year.
If the government runs a deficit greater than 1% of revenue, the penalties would apply immediately after the tabling of the Public Accounts.
Taxpayer Protection
If passed, this Bill would require the government to get the approval of voters before it could introduce a new tax or raise rates of a wide range of taxes. This would apply to personal income tax, corporate taxes, retail sales tax, employer health tax, gasoline and fuel taxes, and education property taxes. Voter approval would be required, except in situations such as when any new or increased tax:
- is offset by a reduction in the total amount of provincial revenues;
- is required as part of restructuring of tax authority between the federal and provincial governments; and
- is required as part of reorganizing or restructuring of one or more provincial Crown agencies.
Voter Approval
If the government wants to seek voter approval through a referendum to authorize a tax rate increase or a new tax, this Bill would require a clear, concise impartially-worded question capable of a yes-or-no answer and an estimate of the revenue impact of the proposed increase or new tax. The vote would be held under rules similar to those for provincial election campaigns.
Alternatively, provincial political parties could seek voter approval through a general election, by filing an official notice of their intent to raise tax rates or to impose new taxes if elected. If a party that filed such a notice is elected, it can implement its plan without a referendum. Once again, the statement of intent to increase tax rates or to impose new taxes must be clear and concise, so voters know exactly what they are being asked to approve.
Many Canadians are recommending that now, while our national government in Ottawa is running annual surpluses, is the opportune time for the enactment of similar federal legislation. Such action, together with the tax decreases anticipated to be announced in the 1999 budget, would significantly enhance Canada as a place to live and conduct business.
The information provided herein is for general guidance on matters of interest only. The application and impact of laws, regulations and administrative practices can vary widely, based on the specific facts involved. In addition, laws, regulations and administrative practices are continually being revised. Accordingly, this information is not intended to constitute legal, accounting, tax, investment or other professional advice or service.
While every effort has been made to ensure the information provided herein is accurate and timely, no decision should be made or action taken on the basis of this information without first consulting a PricewaterhouseCoopers LLP professional. Should you have any questions concerning the information provided herein or require specific advice, please contact your PricewaterhouseCoopers LLP advisor, or:
David W. Steele PricewaterhouseCoopers LLP Royal Trust Tower, Toronto-Dominion Centre P.O. Box 82 Toronto, Ontario M5K 1G8 Canada Fax: 1-416-365-2725 E-mail: Click Contact Link
For further information on taxation in Canada, enter a text search "PricewaterhouseCoopers" and "Canada" and "Mondaq Business Briefing".
Visit our website at Click Contact Link
PricewaterhouseCoopers LLP is a Canadian member firm of PricewaterhouseCoopers International Limited, an English company limited by guarantee.
