Friday, December 16, 2005

Completing the process

I posted yesterday about some of the important considerations which were apparently left out of the Vicq committee's report on business taxes. Following up on that post, while the CCPA position as to the viability of Vicq's recommendations seems entirely right, I can't agree with the conclusion that the result is that the government should avoid acting on the report pending (at the very least) a solid resolution to the national equalization issue.

Before I get to that argument, however, I'll note another problem which appears from the list of submissions which is highlighted in the outcome.

The CCPA paper notes that the committee's proposals generally favour existing holders of capital in Saskatchewan while doing little to encourage further investment. That result shouldn't be surprising given that most of the entities making submissions fell into the former class...while of course somebody merely considering potential investments wouldn't likely go to the effort of making submissions to the Vicq committee, nor necessarily even be aware of the committee's existence. To the extent that one accepts that the goal of business tax policy should be to encourage further investment, the process was thus unfortunately aimed at people other than those who should have been foremost in the committee's thinking.

There are thus serious concerns that the committee may not have been aimed in the right direction to begin with, and may have neglected some important issues along the way.

That said, the consultation process has run its course, and the effective question now is whether the government will follow through on the implicit commitment that it made to the business community when it got the process started. The Vicq committee was the Calvert government's main reward to the business community based on the province's improved financial situation. To ignore the recommendations would only encourage the (albeit inaccurate) preconception that the Saskatchewan NDP is unfriendly to business...and that perception is both politically harmful to the NDP, and economically harmful to the province.

I'll grant that I'd like to see at least some effort to get the business community onside with a moderated approach - i.e. rather than eliminating the Corporate Capital Tax entirely, instead lowering the rate to .3% (which appears to be the national standard) so as to avoid any artificial equalization disadvantage, while also offering an investment credit on the remaining amount as proposed by the CCPA. And I'd hope that most businesses looking at the best interests of the province (and particularly those planning to invest further) would be willing to work with that type of structure.

But if it isn't possible to build a new consensus before the March budget, then better to implement the Vicq recommendations than to kick the can down the road. I certainly can't agree with a tactic of holding off on any action until the completion of a federal report; the Libs' habit of studying issues to death is bad enough when it isn't also holding up provincial action, and equalization doesn't seem to be an issue that'll be resolved anytime soon even once the current report is completed.

For the future, hopefully similar committees will be designed to ensure that concerns such as the CCPA's are taken into account. Similarly, I have to hope that the CCPA and other organizations will make future submissions ahead of time to ensure that a better outcome is reached. For this time, however, the process has run its course, and the Vicq conclusions should be implemented unless there's sufficient business agreement to support a better policy.

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