Bold change is recommended in Charting a Path for Growth: Nova Scotia Tax and Regulatory Review.
The report, written by Laurel Broten, was released today, Nov. 19, and makes 22 recommendations about taxes, and 20 more for regulations, fees and related areas. It is the first comprehensive assessment of Nova Scotia’s tax and regulatory system.
“The Nova Scotia Commission on Building Our New Economy told us why change is needed in Nova Scotia, and this report lays out how we can get there,” said Ms. Broten. “But Nova Scotians have to be willing to accept the fact that tough action is required today, to achieve financial stability and economic opportunity tomorrow.”
Economists, academics, business groups, thought-leaders and government departments, throughout the province and beyond, were consulted. The final report uses extensive research of current and past practices in Canada and elsewhere.
“I asked Ms. Broten to undertake a comprehensive tax review because I am committed to a fairer, more-balanced tax system and one that supports economic growth,” said Finance and Treasury Board Minister Diana Whalen. “I want to thank her for the review. The next step is a full discussion about how best to make the necessary changes to strengthen Nova Scotia’s future. I will outline the first steps in a long-term plan in Budget 2015-16.
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Ms. Whalen said she wants feedback from Nova Scotians on the review and they can do that online and during upcoming budget consultations.
The economic and demographic issues outlined by the Nova Scotia Commission on Building Our New Economy are at the centre of the report.
“In light of the stark reality the commission outlined, Nova Scotia’s tax system must change to generate enough resources to fund public services, put the province on sound fiscal footing and, most importantly, allow the economy to grow,” said Ms. Broten.
The report recommends government freeze spending and redirect savings to tax relief for Nova Scotians and the province’s medium and large businesses — which create the majority of jobs and economic activity. Nova Scotia should also shift its focus away from income taxes and toward consumption taxes. Increasing income taxes was found to be counterproductive and not feasible considering Nova Scotia’s declining demographics and the increased pressure it would put on the youth the province wants to stay.
Personal tax reforms to boost the spending power of Nova Scotians, increase workforce participation, and foster the innovation and investment that comes from risk-taking include:
— an increased basic personal exemption for all Nova Scotians
— indexing (annual adjustments of taxation rates, sometimes referred to as cost-of-living adjustments, in response to inflation)
— eliminating the fifth tax bracket, and merging the third and fourth
— tax credit reform
— redirecting some of the savings to help the working poor and low-income families with children
The report also suggests a pollution tax to shift the financial burden onto those responsible for environmental damage.
“Change doesn’t have to mean higher taxes, but it does have to mean smarter ones,” said Ms. Broten. “Energy taxes are proving more effective than regulation at reducing pollution while creating significant economic and environmental benefits.”
To drive economic and job growth, Ms. Broten recommends simplifying the system, and improving fairness and neutrality. Corporate tax reform recommendations include:
— reducing the corporate tax rate
— increasing the small business tax threshold and tax rate to remove disincentive to grow
— a more balanced approach to tax credits that allows growth, and creates more certainty around eligibility and costs
— doubling annual limits for the Equity Tax Credit, with emphasis on high-growth sectors
The report also makes recommendations about how Nova Scotia can reduce red tape and create a climate more in line with job growth, better economic performance and consumer choice. They include:
— naming a Minister responsible for Regulatory Modernization
— creating a central unit (Office of Regulatory Modernization) with oversight authority
— launching a three-year plan to eliminate ineffective, out-dated or inefficient regulations
The total cost of the review was $154,000.
The full report and related materials are available at www.novascotia.ca/finance . Online submissions about the tax review and Budget 2015-16 can be made to budget@novascotia.ca .
Source: Release
