No new sales tax, Yukon premier vows after getting financial panel's report

Yukon Premier Sandy Silver has ruled out a new territorial sales tax, just hours after a report was released saying it could help avoid future deficits.

The report came from the independent financial advisory panel, appointed earlier this year by the government to study the books and consult with Yukoners about the territory's finances. The government has projected deficits of $40 to $60 million in coming years, after years of budget surpluses.

Panelists delivered their final report on Wednesday morning. In the afternoon, Silver stood up in the Legislative Assembly to say some of the panel's ideas won't fly.

He said the government will not introduce a Harmonized Sales Tax (HST), won't cut the civil service, and won't increase placer mining royalty rates.

"We came out with these statements out front because we really want the conversation moving forward to be of the options that are left on the table," Silver told reporters afterwards.

"For months, the Yukon Party has been suggesting an HST is coming. We're not going to take them up on that suggestion."

The panel's report lays out a detailed list of options for the territorial government to either raise revenue or cut spending, such as hiking taxes on alcohol and tobacco, off-loading more responsibilities onto municipalities, or putting a hiring freeze on the public sector.

Other options include cancelling a Home Owners Grant, increasing property taxes, increasing royalties, introducing a hotels tax, or partnering with the private sector on infrastructure projects or health care delivery.

"Many Yukoners voiced a preference for addressing fiscal challenges on the spending side, rather than introducing new taxes or raising existing taxes," the report says.

An earlier draft of the panel's report, released in September, identified an HST as the most cost-effective way to raise government revenues. The panel then did further consultations and found people were not so hot on that idea.

"With respect to raising revenue, Yukoners were generally not supportive of a Territorial Sales Tax. A common theme seemed to be to raise revenue through user fees and taxation of non-resident economic activity," the report says.

User fees, government efficiencies

When it comes to user fees for services and amenities — for example, camping fees or hunting licenses — the panel notes that Yukoners tend to pay less than most Canadians. Just five per cent of all government spending in Yukon is covered by user fees, the report says.

"Low user fees are also not generally a feature of the territories, with N.W.T. funding about 10 per cent of consolidated government spending with fees and Nunavut funding over 17 per cent. Nationally, the average is just over 13 per cent," the report says.

If Yukon's fees were raised to cover 10 per cent of the spending, "it would raise over $60 million — more than the projected fiscal imbalance," the report notes.

The report says some Yukoners also want to look at the size of government and the delivery of government services.

"There were comments on the structure of the civil service, from reducing it in size and/or reducing salaries, to restructuring, so there is a more effective distribution of the workload," it reads.

"There were suggestions to use existing human resources more effectively by eliminating or scaling back programs that have outlived their usefulness and redeploying government employees in other areas of priority." 

The government could also undertake a "thorough review" of the health care system, which consumes about 30 per cent of the territory's annual budget. Health care costs will only grow as the population ages, the panel notes.

Meetings across the territory

According to the government, more than 800 individuals, businesses and organizations took part in the consultations this fall. The panel held more than 60 meetings across the territory and met with First Nations organizations, municipalities and other stakeholders. 

The final report is now before the Yukon government to decide whether to take any of the suggested actions. And according to the report, some Yukoners say it's time to get on with it. 

"It must be noted that not all Yukoners supported further reviews of issues, but rather suggested that government should be taking immediate action," it says.

Silver says other than ruling out an HST, government job cuts, or higher mining royalties — no decisions have been made, and the government will study the report.

"Before making decisions on the rest of the options we absolutely need to do our due diligence," the premier said.

One option, according to the panel's report, is for the government to simply do nothing. There's no looming crisis, it says.

"Draconian cuts to spending or dramatic increases in tax rates are not necessary to put the territory's finances back on a sustainable footing," the report says. "Is Yukon on an unsustainable track even if policy changes do not occur? Not necessarily.

"Strong real GDP growth beginning in 2019 and onwards, driven mainly from new mining operations (Coffee Gold, Eagle Gold, and Casino), may help improve the territory's budget situation."

The panel has been invited to appear before MLAs, on Tuesday, to talk about the report and answer questions.