Advertisement

Austerity provincial budgets to claw back most of Ottawa’s tax breaks: BMO

The new Canadian five and 10 dollar bills, made of polymer, are displayed with the previously released 20, 50 and 100 dollar notes following an unveiling ceremony at the Bank of Canada in Ottawa April 30, 2013. REUTERS/Chris Wattie

The Conservative government likes to trumpet its “low tax plan for jobs and growth” puts money back into the pockets of consumers, but the financial state of many provinces, according to BMO Nesbitt Burns, is putting a dent in some of the federal government’s efforts.

“Most of what Ottawa will be returning to one taxpayers’ pocket, the provinces will take out of the other,” wrote Robert Kavic, a senior economist with BMO, in a recent note.

It’s budget season and many provinces — Alberta, Quebec, New Brunswick — are looking to cut debt and spending, which could result in a tax hike for some Canadians.

“All told,” Kavic wrote, “while Ottawa’s package of tax cuts/benefit increases will come in at around $4.5 billion in FY15/16, it looks like the provinces will take back about three-quarters of it.”

Kavic said the net tax/fee increases for the 2015-2016 fiscal year have already hit more than $2 billion.

Last week both Alberta and Quebec tabled their provincial budgets. The Liberal government in Quebec has pledged to get rid of the province’s deficit, through cuts and restructuring a number of government departments.

Alberta’s budget comes at a trying time for the former ‘have’ province, after an unexpected drop in the price of oil lead to deep swaths of red in this year’s budget. The first budget under Premier Jim Prentice includes new and increased taxes to try and deal with a revenue shortfall of $7 billio n — the largest in the province’s history.

Taxpayers in Alberta can expect higher prices for beer, wine, insurance and tobacco thanks to new levies. Albertans can also expect a new healthcare levy to come into effect July 1, 2015.

"Perhaps the key issue of recent years was policymakers acting as though $100-plus oil was here for good, and not banking more of the windfall for times like today," Kavcic noted.

New Brunswick’s budget is due Tuesday, March 31, and it’s expected a tax increase by the Liberal government is on the table as the province tries to find $600 million in annual savings.

Nova Scotia and Manitoba’s budgets are on their way in the next few weeks and the date for Ontario’s is still to be announced.

“Atlantic Canada is still on deck,” Kavic noted, “and most of the group will be pushing through tax hikes to some extent, while Ontario will likely have to lean on taxpayers, at least somewhat, in order to fend off the credit rating agencies that have given the Province a one-year post-election pass.”

There’s been no sign from the federal government about when Finance Minister Joe Oliver will table the budget in Ottawa. In the House of Commons Monday afternoon, Oliver said the document will be coming soon.

“As regards to the budget,” he said during question period, “stay tuned.”