The seventh report of the Katz Commission discusses provincial taxation, and comments on the in-depth investigations that have been made by the Financial and Fiscal Commission (FFC).
Most of us are aware that the "fat cat" insofar as provincial tax is concerned is currently perceived as being the taxes on gambling. But the Constitution also empowers the provinces to impose their own taxes, levies, and duties, and also to levy flat rate charges on the tax bases of any tax, duty or levy imposed by the national legislation. The provinces may not impose their own separate income tax, VAT, GST, rates on property and customs duties.
So what could this mean to you?
One of the options that has been looked at is the possibility of the provinces imposing a flat rate surcharge on the personal income tax base. This could mean that you could end up paying your normal income tax to the government, and also paying an additional amount on top of the normal tax, which is for the province in which you live.
However, the Katz report emphasises the need to make "tax room" , in other words to reduce the national rate of income tax in order to make "room" for a provincial surcharge. This will ensure that your total income tax burden does not increase. Overall, though, Katz's report is not in favour of the surcharge option for a number of reasons, including:
* The additional burden it would place on the tax administration; and
* The effect on the distribution of funds to the various provinces.
Notwithstanding Katz's recommendation against the surcharge, though, you may still find yourself with such a tax in the not too distant future.
The next option that was considered was a provincial surcharge on the fuel levy. Again the report emphasised the need for central government to create "tax room" for this surcharge, so that you and I do not pay a higher fuel price.
Again the Katz Commission saw drawbacks, especially where the levy is set at different levels in different provinces. The report refers to the risk of cross border shopping, which could leave some provinces with lots of income from this source and others with very little.
The commission saw the fuel levy option as preferable to the income tax surcharge.
In general, after looking at and rejecting a number of other options, the Katz Commission favoured user charges levied by provinces, which would mean that you would be able to choose whether you pay the tax or not by choosing to use a facility or not. This would also relieve the central government of the need to create "tax room".
Whatever is eventually implemented, though, it seems that as taxpayers we are probably in for a tough ride for a while, until the pros and cons of each option are tested and an ideal scenario which suits the country as a whole is found.