Pallister won’t wait for Ottawa; Manitoba carbon tax, PST drop to 6% in effect July 1 By: Larry Kusch Posted: 11:59 AM CST Thursday, Mar. 5, 2020 Last Modified: 9:31 AM CDT Monday, Apr. 27, 2020 Updates

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This article was published 05/03/2020 (1793 days ago), so information in it may no longer be current.

In a surprise move a week before the provincial budget, Premier Brian Pallister announced plans to reduce the provincial sales tax by a percentage point for the second consecutive year.

The tax break comes with a catch — the government plans to levy its own carbon tax, in a bid to replace the current federal green levy.

At a news conference on Thursday, Pallister vowed that Manitoba taxpayers will come out ahead, saving more money through the one-point PST cut than they’ll pay in a new provincial carbon tax.

Once implemented on July 1, Manitoba will have the second-lowest provincial sales tax in Canada at six per cent. Last July, the government lowered the sales tax to seven per cent from eight per cent.

The announcement came as talks between Manitoba and Ottawa over control of carbon-tax revenues have bogged down.

“The ball’s in Ottawa’s court," the premier said, when asked what would happen to the current $20-a-tonne federal carbon levy, which is set to rise to $30 on April 1.

"We’ve reached out extensively over the last number of months to have them agree (to a deal) and that hasn’t happened. So what Ottawa does, Ottawa decides, not us.”

The announcement came as a shock since the Progressive Conservatives gave no hint of such a move during last year’s election or in its November throne speech.

While some welcomed the planned PST cut, others said the tax moves, taken together, do little to fight climate change.

In a statement Thursday afternoon, federal Environment and Climate Change Minister Jonathan Wilkinson said Ottawa had yet to receive a formal proposal from Manitoba.

"Once we receive their proposal, we will assess it against the federal benchmark as we have done with proposals from all provinces and territories," he said, noting that the federal plan requires levies to be raised by $10 a tonne per year until 2022, when the tax reaches $50 a tonne.

Dropping the PST a percentage point will cost the province approximately $325 million in annual revenue. The province estimates its proposed carbon tax will generate $285 million a year in income.

Earlier this week, Finance Minister Scott Fielding said the province expects to post a $325-million deficit for the current fiscal year.

The government estimates the average Manitoba household will save $359 in 2022 with a reduction in the PST.

Pallister said a lower sales tax "will support Manitoba businesses and … job creation efforts." He said the province’s intent is to have it remain flat at $25 a tonne.

“This is a shell game that I don’t think is going to do much to help the environment.” – NDP Leader Wab Kinew

NDP Leader Wab Kinew said Ottawa has already served notice that it won’t accept a carbon levy that does not rise over time.

"This is a shell game that I don’t think is going to do much to help the environment," he said.

The province’s move could also lead to a "bureaucratic mess," in which Manitoba levies the carbon tax and the feds top it up to meet their targets, the Opposition leader said.

Kinew also raised concern that the funding shortfall caused by the loss of PST revenue would come at the expense of health and education programming.

Manitoba originally proposed a flat $25-a-tonne carbon tax in 2017, but withdrew the proposal when it did not receive assurances from Ottawa that it would not impose an escalating tax. Before the province withdrew the levy, Ottawa indicated it would institute a parallel process for collecting a top-up beyond Manitoba’s proposed $25-a-tonne tax.

Loren Remillard, president of the Winnipeg Chamber of Commerce, said his organization welcomes any tax reduction — and a made-in-Manitoba approach to combatting climate change.

However, he’d like to see more evidence as to how the government is going to use carbon tax revenues to battle climate change.

"The real strength of any carbon levy is the investments you make to help people make the transition in their decision-making, be it industry or individuals. That is something we’re still not hearing a lot of," Remillard said.

Environmentalist Eric Reder said he was frustrated by the announcement of offsetting taxes, accusing the premier of "gamesmanship," with Ottawa, when the real focus should be on saving the planet from climate change.

"We need a commitment to get to zero emissions," he said.

Dropping the PST a percentage point will cost the province approximately $325 million in annual revenue. The province estimates its proposed carbon tax will generate $285 million a year in income.

Pallister claimed his move to seize control of carbon pricing would allow the province to double its targeted greenhouse gas emissions targets by 2022.

Michael Bernstein, executive director of Clean Prosperity, a non-profit organization that supports market-oriented solutions to climate change, said he doesn’t understand the province’s logic.

“It’s basically saying that a lower price [on carbon] will get higher emissions reductions. But there is nothing in their plan, that I see, that is more stringent than what the federal government has proposed. So it’s really hard to understand how that’s possible.”

A government official explained that Manitoba was set to reduce greenhouse gas emissions by one megatonne through initiatives other than a carbon tax. With the tax, it will be able to slash emissions by another megatonne.

The calculations do not consider any emissions reductions that might occur as a result of the federally imposed carbon tax, he acknowledged.

Meanwhile, reaction from industry and other business groups to the announcement was mixed.

The Manitoba Trucking Association welcomed the news, saying it would help provide "certainty around costing," for its members.

However, Keystone Agricultural Producers, a Manitoba farm lobby group, expressed concern about moving "towards an unclear tax structure at a time when farmers are already dealing with seemingly unprecedented uncertainty," in their operations.

The Canadian Taxpayers Federation slammed Pallister’s move in light of the recent Alberta Court of Appeal decision that found the federal carbon tax unconstitutional.

"This is the worst possible time for Premier Brian Pallister to be flip-flopping on his promise to fight the carbon tax when the Alberta courts just ruled that Ottawa’s heavy-handed tax is unconstitutional," said Franco Terrazzano, the CTF’s Alberta director.

— with files from Dylan Robertson, Carol Sanders and Sarah Lawrynuik

larry.kusch@freepress.mb.ca