2 premiers asking Ottawa to cover provincial cost of proposed tax holiday

Two provincial premiers are urging the federal government to cover the provincial costs associated with Prime Minister Justin Trudeau’s proposed tax holiday. Trudeau recently announced plans to temporarily remove the GST and HST from certain goods until mid-February as a way to ease the financial burden on Canadians in the wake of the pandemic.

However, in provinces with a harmonized sales tax system, which combines both federal and provincial taxes administered by the federal government, the entire tax, including the provincial portion, will be waived. This move has raised concerns for some premiers about the financial impact on their provinces.

New Brunswick Premier Susan Holt has stated that the tax break could cost her province $62 million. She emphasized the importance of engaging with the provinces and reaching an agreement before implementing such a significant financial change. Similarly, Prince Edward Island Premier Dennis King expressed worries about the $14 million cost to his province, noting that it would create a hole in their budget.

Both premiers have voiced their willingness to work with the federal government on affordability measures but expressed disappointment that they were not given prior notice about the tax holiday. Holt stated that she remains optimistic that Ottawa will reimburse the province, while Trudeau did not commit to compensating provinces for lost revenue when questioned by reporters.

On the other hand, not all provinces are concerned about the federal tax holiday. Ontario had already eliminated the provincial portion of the HST from some goods included in the federal exemption, such as children’s clothing and books. Premier Doug Ford commended the federal government’s efforts to put more money into people’s pockets and stated that Ontario had taken similar actions in the past.

Newfoundland and Labrador Premier Andrew Furey also supported the federal plan and announced that his government would follow suit by removing the HST from many goods and services for two months. However, Nova Scotia, currently in an election campaign, is in caretaker mode and unable to make any decisions on the matter.

Economist Trevor Tombe has raised concerns about the underestimated cost of the tax holiday, estimating that covering the provincial portion could nearly double the government’s $1.6 billion estimate. Tombe suggests that the total cost of the tax break for HST provinces could reach around $3 billion when factoring in provincial compensation agreements.

In conclusion, while the federal tax holiday aims to alleviate financial pressures for Canadians, the concerns raised by provincial premiers highlight the importance of collaboration and communication between federal and provincial governments to ensure a smooth implementation of such measures.