Some provinces say they could lose millions of dollars to federal tax break
Federal Tax Holiday Announcement Sparks Controversy Among Provinces
The recent announcement by Prime Minister Justin Trudeau regarding a federally-imposed “tax holiday” has stirred up controversy among provincial governments, with some officials expressing concern over the potential financial implications of the decision. Trudeau revealed on Thursday that the federal government would be suspending the Goods and Services Tax (GST) and Harmonized Sales Tax (HST) on certain goods until mid-February, aiming to provide relief to Canadians facing affordability challenges in the wake of the pandemic.
In Canada, five provinces have a harmonized sales tax system, which combines provincial and federal taxes on goods and services. The federal government administers these taxes and then returns the provincial portion to the respective provinces. Finance Minister Chrystia Freeland’s spokesperson confirmed that if the tax break plan moves forward, the entire HST would be waived in the provinces that harmonize the sales tax, including the Atlantic provinces and Ontario.
However, officials from two provinces have expressed their surprise and frustration at the lack of advance notice they received about the complete removal of the sales tax. They are also uncertain about whether they will be compensated by the federal government for the loss of tax revenue resulting from the tax holiday.
Speaking to CBC News anonymously, representatives from these provinces disclosed their concerns, emphasizing the need for clarity and transparency in the implementation of the tax holiday. The sensitivity of the issue has prompted them to request anonymity for both themselves and their provinces.
Provincial Responses to the Tax Holiday
Newfoundland and Labrador Premier Andrew Furey has publicly supported the federal government’s initiative, referring to it as a “tax vacation” that could benefit consumers. As one of the two Liberal premiers in the country, Furey welcomed the proposal to eliminate the HST on a wide range of goods and services for a two-month period.
On the other hand, New Brunswick Premier Susan Holt has taken a more cautious stance, expressing the need for a deeper understanding of the potential costs associated with the tax holiday. Holt raised concerns about the impact on provincial tax revenues and the fiscal implications for the current year.
Meanwhile, Ontario has already removed the provincial portion of the HST from several items included in the federal tax vacation, such as children’s clothing, shoes, diapers, books, and newspapers. Premier Doug Ford’s office issued a statement urging the federal government to reconsider the upcoming carbon tax hike scheduled for April 1.
Nova Scotia, currently in an election campaign, is operating in caretaker mode, while Prince Edward Island has yet to provide a response to inquiries about the federal tax holiday.
