Sask. Chamber of Commerce wants to review entire tax system, HST

The Saskatchewan Chamber of Commerce is looking for ways to simplify taxes for businesses in the province.

In its blueprint to build a competitive business strategy for Saskatchewan, the chamber calls for a review of the entire tax system, provincially and federally. One of the recommendations in the Beyond 2020 report released on Wednesday is to explore the idea of a harmonized sales tax (HST).

“We need to think about it because our federal and provincial tax systems now have really not been reviewed in a very long time,” said CEO Steve McLellan. “Taxes are an impediment to growth. We need to make sure we get the fair value for tax rates but we also need to make sure that we have the right deal for business.”

The federal GST is a value-added tax that allows businesses to claim a credit for GST paid on business inputs, while the PST is a retail sales tax that does not offer the same advantages. The report found that approach is inefficient and warrants reconsideration.

Moving toward the HST would combine the six per cent PST and five per cent GST into a single, value-added sales tax. McLellan explained it’s worth looking at the HST models used in other provinces while determining what model works best for Saskatchewan.

“It simplifies it from a consumer and a business perspective and anything that will reduce the cost of business and make them operationally more fluid, that’s a good thing for everybody,” said McLellan.

The report outlines the strengths and weaknesses of the business climate in Saskatchewan, challenges faced by its members and 24 recommendations to improve competitiveness moving forward.

The report points to several tax barriers that businesses face in Saskatchewan, including the 2017 increase to the PST from five to six per cent along with removing the PST exemption on goods and services like restaurant meals, construction labour and most insurance premiums.

A representative from the potash mining section commented that removing the exemption on construction labour costs their organization tens of millions of dollars in the middle of a large construction project.

McLellan said the main catalyst that led to the report was tax reform in the U.S. In 2017, the Trump administration lowered the federal corporate income tax rate from 35 per cent to 21 per cent, reducing Canada’s tax advantage.

The chamber’s report also noted that Canada’s two-tier corporate income tax structure inadvertently serves as a barrier to growth and expansion.

“In order for us to compete with what is our largest market — and many Saskatchewan companies have holdings in the U.S., have operations there — we need to make sure the place they want to do business that’s the most competitive for them is right here in Saskatchewan,” said McLellan.

The report acknowledges that Saskatchewan remains competitive today but that as the global trade landscape changes, so must the province to stay competitive.

Saskatchewan’s strengths include a comparatively low provincial tax, income tax and non-residential property taxes. It also pointed toward progress in reducing red tape and a large entrepreneurial spirit. In Saskatchewan, 98.8 per cent of businesses are defined as small businesses with zero to 49 employees.

On the flip side, the report found there are significant barriers when these businesses try to expand or scale up their operations, once again pointing to Saskatchewan’s “inefficient conventional retail sales tax” as the main impediment to business investment and attraction.

The report also made recommendations on regulations, interprovincial trade, procurement, innovation and workplace development.