A Taxing Relationship

Photo by Flickr user Alan Cleaver

It appears municipalities are changing tack in the ongoing battle with the province to get a better financial deal. Shortly after Kathy Dunderdale stated that the municipal operating grant formula will not be addressed in the 2012 provincial budget, St. John’s mayor Dennis O’Keefe fired back in a press release, “it is fundamentally wrong, unfair and inequitable that the provincial government forces municipalities to pay provincial HST on the essential services we provide our residents.” With the renegotiation of municipal operating grants off the table O’Keefe and the municipalities will focus on battling to keep their provincial portion of the HST.

In this province it is estimated that municipalities pay between $25 and $30 million in HST to the provincial government. About $10 million of this is paid by the City of St. John’s, leaving a lot of money being paid by municipalities beyond the overpass, many of which face significant infrastructure deficits. As a result, municipalites have begun working together to try to wrangle a bigger share of money back from the province.

“Everybody is in the same boat,” Corner Brook Deputy-Mayor Donna Luther recently told the Western Star. “Infrastructure is crumbling and we are taxing people to try and come up with the money we need.”

The HST situation in particular riles up municipalities because the provincial government itself is exempt from federal governments taxes—a courtesy municipalities want to see extended to them as well.

Ultimately we are talking about how our own money is being spent. Right now about eight cents of a taxpayer’s dollar goes to municipalities, 50 to the federal government and 42 to the provincial government. Municipalities are creations of provincial law, a law that limits municipalities’ ability to tax its citizens and generate revenue.

Municipalities will be quick to tell you that they are the ones who hear the complaints about the pothole-riddled roads and leaking water mains. The provincial government, though, is understandably reluctant to make any change that leaves them with less money. The province seems to be posturing itself to postpone any major changes to municipal financing until next year, and by then I wouldn’t be surprised if the province throws municipalities a bone—possibly something along the lines of paying municipal property tax on provincial buildings.

But the question is: will municipalities be happy with anything less then not having to pay the province HST?

Our magic 8-ball has come up “cannot predict now.”

In the meantime, be sure to contact your MHA or councillor and let them know how you feel about all of this.


  1. Anon · December 1, 2011

    Don’t the Americans get around this by letting municipalities/county governments issue bonds and other financial instruments in order to raise revenue?

  2. Andrew Harvey · December 1, 2011

    Hey Anon,
    You bring up one of the other points made int he cities position paper on municipal financing. Currently the city is extremely limited in what it can do in this regard. The position paper calls for the taxation and fiscial powers of municapalities to be looked at. I don’t know too much about bonds, but this might be the sort of thing they are thinking about when they say this.

  3. Stumper · December 1, 2011

    Bear in mind that a number of US municipalities have declared bankruptcy or are in the process of doing so, because they have a bit TOO much latitude to go into debt.