According Jack Mintz, British Columbia has a more competitive tax environment than Alberta
Politics vs. Policy
When he was younger, Max Fawcett wanted to make a mint in the markets. Now as the managing editor of Alberta Venture he gets to write about them. Close enough, right? He can be reached at mfawcett@albertaventure.com
by Max Fawcett
Strange fact: according to the University of Calgary’s Jack Mintz, British Columbia has a more competitive tax environment than Alberta. Even stranger: the decision that created that same tax environment, the harmonization of federal and provincial sales taxes, ended up costing a Premier whose government had become synonymous with scandal and who had personally managed to survive a drunk driving misdemeanor conviction he picked up while on vacation in Hawaii the job that he’d held for almost a decade.
It might be tempting for Alberta’s political leaders to dismiss this as the latest eccentricity in a province that is known for them – this is, after all, a province that once elected a man who had changed his legal name to Amor de Cosmos, or “lover of the stars” as its premier. But that would be a missed opportunity, given that the issue of sales tax harmonization will make its way into Alberta at some point in the (for them) not-nearly-distant-enough future.
A sales tax in Alberta is, as we recently discussed in the pages of this magazine, a difficult idea to sell in this province. But as Mintz noted last week, the HST – a harmonization of British Columbia’s existing 7 per cent provincial sales tax with the federal 5 per cent general sales tax – is also good policy, one that “has drastically lowered the overall cost of doing business, thereby making B.C. one of the most attractive business environments in Canada.” If Alberta is genuinely interested in maintaining its edge as one of the best places to do business in Canada, it will have to move forward on a sales tax at some point or risk being left behind.
Good policy isn’t necessarily good politics, though. In fact, the two are often in direct conflict with each other, as the Harper government’s decision to reduce the federal GST from 7 to 5 per cent demonstrated. The decision was widely panned by economists as a meaningless gesture that would erode the federal government’s ability to fund existing entitlements and programs while doing little for the average Canadian family, but the street-level political appeal it held was undeniable. In the case of the HST, that strategic calculus is turned on its head. The policy itself might be sound, but the optics are just awful. Short of appointing a family member to the Senate, there isn’t a decision that’s harder to defend in Canadian politics than an increase in taxes.
If nothing else, Gordon Campbell showed his provincial colleagues how not to do it. After promising not to impose the HST before the most recent provincial election, he then turned around right after being re-elected and announced that he would in fact do just that. The merits of the tax thus became incidental to the strategy behind its imposition, and British Columbians were unmoved by subsequent efforts either by Campbell or his lieutenants to justify the decision.
In Ontario, though, Premier Dalton McGuinty has taken a more effective approach. He knew that the harmonization of provincial and federal sales taxes was a good idea, and the $4.3 billion carrot the federal government was dangling in front his cash-strapped government probably didn’t hurt. But he also knew that it wouldn’t sell itself, and so he appointed John Wilkinson, a Certified Financial Planner, the government’s Minister of Revenue and a man who the Toronto Sun’s Christina Blizzard said “looks for all the world like your family accountant – the guy who makes sense of your RRSPs” to sell the policy.
In Alberta, the virtues of a sales tax (and its harmonization with the federal GST) are no mystery to either the people at Alberta Finance or those within the caucus of the Progressive Conservative Party. But as Gordon Campbell’s self-destruction makes perfectly clear, its implementation will come at a cost. Just how high that cost is, and whether the next Premier of Alberta will be willing to pay it, remains to be seen.
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