Tax escalator under scrutiny

One event that seldom gets much media coverage outside Ottawa is committee stage review.

Basically, once a bill has passed to second reading in the House of Commons, it will come before the appropriate parliamentary committee for further scrutiny. That examination often involves hearing from affected stakeholders and expert witnesses.

This closer scrutiny by parliamentarians may often reveal a much greater level of detail that can illustrate areas of concern.

Recently, at the Finance Committee, an example of this occurred during scrutiny of the Liberals omnibus legislation related to the Budget Implementation Act.

More specifically, the Liberals promise to raise taxes on most beer, wine and spirits by two per cent in the upcoming budget was examined.

Upon further investigation, it was revealed that the proposed legislation calls for this increase in taxation to occur every year, rising with the rate of inflation.

Why is that a problem?

Ultimately, there is an expectation that any proposed tax increase or decrease must be signed off on by the Minister of Finance so it can be fully debated and scrutinized in Parliament.

In this situation, this tax would increase every year by default at a rate of inflation that would not be determined by a democratically elected member of Parliament.

To some, this may not be a concern, but others view it as a slippery slope that if unchallenged might lead to other taxes also quietly receiving annual escalators set by unelected department officials in Ottawa.

In this case, the Department of Finance estimates this proposed tax escalator may well raise roughly $470 million over the next five years so it is not an insignificant amount of money that may also adversely impact Canada’s producers of these related beverages.

There is also a possible Okanagan connection as currently 100 per cent Canadian produced wine is exempt from this tax. However, the proposed increase in tax onto imported producers products may be subject to a trade challenge that could threaten the current domestic tax exemption.

From a historical perspective, the last time an annual escalator tax was used in Canada was under the Liberal government of Pierre Trudeau.

Already I am hearing concerns from industry producers however as most citizens are not aware of the proposed use of escalator taxation the feedback locally has been minimal.

My question this week relates to the use of escalator taxation.

• Is escalator taxation something you support as an efficient means for government to raise revenue or should all proposed increases or decreases in taxes be contained and debated in a related budget?

I can be reached at [email protected] or call toll free at 1-800-665-8711

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.