Economist Wade Locke says HST hike easiest, fairest way to increase revenue

Economist Wade Locke says an increase in the Harmonized Sales Tax would be the "easiest and most effective way" for Newfoundland and Labrador's cash-strapped government to generate additional revenue.

In an interview with On Point with David Cochrane that will air Saturday, Locke said "I stand by that as a possible strategy" when asked how the province could best cope with the current fiscal challenge.

"It's fairer," he said. "It allows people to have more discretion over where they put their money, it doesn't distort savings, and a number of those kinds of factors."

Locke said wrote former finance minister Jerome Kennedy several years ago, saying an increase in the HST from 13 to 15 per cent should be considered in the future.

All options under consideration

The current finance minister, Ross Wiseman, recently confirmed that all options are now on the table to deal with a steep decline in government revenues, including tax increases, spending reductions and increased borrowing.

The HST was introduced in 1997 after the GST was harmonized with the provincial sales tax.

The HST has been steady at 13 per cent since January 2008. The federal portion is five percentage points, while the provincial component is eight.

When the federal government lowered its rate from seven to five per cent, some provinces increased their rates in order to bolster their coffers.

With Wiseman predicting five more years of deficits in the face of shrinking oil revenues, Locke believes it's now time for this province to do the same.

Locke is part of a group at Memorial University that is conducting a review of the province's income tax system.

The group is expected to release its findings next month, with a view towards improving the equality and progressiveness of the system.

It was prompted by concerns that low-income earners were not benefiting from the prosperity that came with growth in the oil industry.