Dwight Duncan, Ontario's Finance Minister announced Monday that the provincial Budget, to be presented this Thursday will not include any new taxes. However, governmental officials are looking at all their options to help pay down an unprecedented deficit of 25$ billion for the year ending on March 31.
While Mr Duncan said there would be no asset sale announced in the budget either, the governing Liberals have not ruled out possible future privatization of assets such as the LCBO or the Ontario Lottery and Gaming Corp.
The Budget should also present Ontario's plan to curb the deficits that will keep Ontario in red ink for the next five years. The opposition does not trust the Government on this "no new taxes" Budget promise; they rightfully mention the overlooked "Ontario Regulation Made Under The Ontario Energy Board Act, 1998, Assessments For Ministry of Energy and Infrastructure Conservation and Renewable Energy Program Costs" announced last week.; this innocuous title actually hides a new "green tax" that Ontario consumers may see on their energy bills as soon as this May. The tax should cost about $4. per year per household but will still yield additional $53 millions in revenue. To paraphrase Shakespeare's Romeo and Juliet quote, " A tax, by any other name, will smell the same....
Meanwhile back at the ranch (in Quebec)
Quebec's Finance Minister who initially also intended to present his Budget March 25 has now confirmed it will be presented Tuesday March 30. Quebec is also wrestling with the need to come to terms with deficits in order to come back to the zero-deficit trademark of Quebec Liberals; it should be remembered that (then) Finance Minister Monique Jérôme Forget assured during the campaign leading to the December 8, 2008 provincial election that the next budget would be balanced; as soon as February 2009, she would confirm a deficit for the 2009-2010 year. In fact, the deficit will now reach at least 3.9$ billion for the current year.
Unlike his Ontarian neighbor, Mr Bachand has considered a number of "tariffs" increases for things such as hunting permits, driver's licenses etc... However, it appears that the favorite approach is to increase Quebec's Sales Tax ("QST") currently nominally at 7,5% (but really at 7,875% because, unlike in all other provinces, the tax applies to the 5% GST.)
Last year's budget already included a 1% hike to 8,5% scheduled for January 1, 2011. It is now widely believed that a new 1% hike could be included in next Tuesday's budget speech. Combined, these QST hikes would yield a further $3.2 billion in revenue. By doing so, Quebec will completely fill the 2% "tax void" created by the Federal Conservatives reduction of the GST from 7% to 5%.
You can bet that the budget will mention that the $3.2 billion tax hike is due to the Federal government's refusal to "compensate" Quebec for "harmonizing" its sale tax with the GST back in the 90's. Based on the $4.5 billion compensation package Ontario received to merge its Retail Sales Tax ("RST"), Quebec feels they should receive $2.6 billion for their past harmonization. So far, (after all these years) no deal has been reached and the last federal Budget was mum on the subject to Quebec's dismay.
In all fairness, the QST is far from totally harmonized with the GST, and additionally, a however "harmonized" provincial tax is far from the full merging of the Maritimes, Ontario and BC taxes into the HST; it is hard to blame the federal government on their current position that would prefer to see the QST folded into a "national" sales tax; however, it may be politically unpalatable for Quebec's "distinct society" to let the feds administer their own "national" sales tax, although a full merging of the QST into the HST makes more sense financially, and business wise.
Don't feel good or bad too fast.
By the way, Gatineau's residents should not feel too proud ( or Ottawa's residents too sad) that Quebec's provincial deficit at $4 billion is, after all, six times smaller than Ontario's ($25 billion). It is dangerous to compare nominally these numbers. Economists agree that a better comparison is to compare the respective provincial debt in terms of the size of the economy or "Gross Domestic Product" ("GDP"). Using this measure, as of March 2009, Quebec's debt represented 42.7% of GDP, the highest level of all Canadian provinces. Ontario's debt is 24,5% of GDP. ( for the federal government it's 32.8%).
Accordingly, Ontario, in fact, has more leeway but cannot obviously sustain $25 billion yearly deficits. Quebec is already so indebted that it is forced to take more drastic immediate measures. Moreover, Quebec's debt problem are compounded by demographic considerations. As the saying goes, Statistics are like a bikini, what they show is interesting but it is what they hide which is significant.
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