Is it time to rethink P.E.I.'s HST rebates?

In raising a point of privilege in the legislature last week, Opposition MLA Steven Myers struggled to make the case that P.E.I. Premier Wade MacLauchlan had misled the House. Speaker Buck Watts wasn't letting him use the word "misled" or any other word which would convey that anything the premier said might have been untruthful, considering all that language unparliamentary. 

"I guess what I'm trying to say is that his answers today weren't truthful to the House based on the documents that we have from the CFIB," Myers explained. "I don't know how to say that any other way."

The PCs were pointing to a questionnaire published by the Canadian Federation of Independent Business during the 2015 provincial election, in which the leaders were asked about the possibility of raising taxes over the next four-year term.

MacLauchlan was then quoted as saying "The Liberal Party is committed to fiscal prudence. One of the key principles of fiscal prudence is respecting taxpayers. There are no plans to raise taxes, fees and levies."

Last week, however, MacLauchlan told the legislature he had never promised to not raise taxes. Thus, the matter raised by Myers.

The premier argued that saying you have no plans to raise taxes is not the same as a promise not to raise them. The premier explained to reporters last week the original statement was "a response that was given in a moment in time." The moment, he said, is gone; and the plans regarding the HST have changed.

Other Liberal statements on the HST

But that wasn't the only thing the Liberals said about the HST during the election.

In a Liberal Party press release, MacLauchlan was quoted as saying "Islanders expect and deserve a government that is fiscally responsible and that makes achievable commitments that won't result in tax increases or cuts to services or employment."

And on the HST: "As our province's fiscal position improves, a Liberal government will work toward removing the HST from electricity."

HST on electricity and everything else is going up. The good news is, the province's fiscal position will improve quite a bit as a result. That led Green Party Leader Peter Bevan-Baker to suggest last week that maybe this would be a good time to revisit P.E.I.'s HST rebate system.

Every province with the HST has some system of rebates in place to offset the tax for certain sectors of the economy.

Just about every facet of P.E.I.'s rebate system has been criticized since the tax came in three years ago.

Here are some places P.E.I. might want to consider making changes, based on what's done in other jurisdictions.

Household energy

Nova Scotia exempts all forms of household energy from the provincial portion of its HST. B.C. did too, before scrapping the tax. Ontario taxes all forms of household energy but offers tax credits for low-income households. Only P.E.I. has singled out one form of energy — home heating oil — for exemption.

Besides being cited as unfair by residents who heat with electricity, propane or wood, the P.E.I. Real Estate Association made the case recently that the current system provides "a break to the people that use the most polluting sources of heat."

Low-income credit

With the announcement of a one per cent increase in the HST, P.E.I. also announced it would boost the value of HST credits to low-income households by 10 per cent. But here's what the math looks like: the boost in credits will be worth up to only $20 a year for households that earn less than $60,000, but the average Island household will pay around $350 more per year in taxes.

New housing

The residential construction industry on P.E.I. blames the HST for a severe drop in housing starts on the Island. It's been calling for a rebate on the purchase of new homes similar to the one offered in Ontario. Nova Scotia also offers an HST rebate on new homes for first-time home buyers.

Charities, municipalities, schools & hospitals

Charities are allowed to claim back a portion of the tax they pay. Across the country, the percentage varies — in most provinces the rebate is 50 per cent. Ontario allows 82. P.E.I. sits alone at the bottom of the table, offering just 35 per cent.

P.E.I. is also the only province that provides no HST rebate to municipalities — other rebates across the country vary from 25 to 100 per cent. At its annual general meeting Monday, the Federation of PEI Municipalities called on the province for a rebate.

Some provinces also provide rebates for schools, hospitals, and post-secondary institutions, but P.E.I. offers none.