Taxation in New Brunswick—and whether or not heavy industry is paying their fair share—continues to spark much debate across the province. Motion 31 (an offshoot of Bill 9, which was withdrawn earlier this year) is the latest issue involving the taxation of machinery and equipment in the province.
What is Motion 31?
Motion 31 was introduced by Saint John Liberal Party MLA Gerry Lowe, and supported by the People’s Alliance and Green Party on March 28, 2019. As a New Brunswick resident, imagine if things like vehicles and electronics—for which you have already paid taxes—were suddenly included in your annual property tax assessment. That’s what Motion 31 is proposing for New Brunswick-based businesses.
Motion 31would lift the property-tax exemptions allowed for business-related machinery and equipment. Mr. Lowe argues it would reduce residential property taxes, thereby encouraging people to move to the city and province as a whole. But there’s no guarantee the money will be spent this way. What’s more likely is that Motion 31 will tax industry out of the province.
Motion 31 could harm NB residents as much as it will businesses.
New Brunswick is already struggling to meet labour demands due to an aging population and a mass outmigration to central and Western Canada. Private-sector capital investment in machinery and equipment which is often supported by the Atlantic Canada Opportunities Agency (ACOA), helps companies keep pace and innovate, creating new jobs as businesses grow. After all, without businesses to employ people, residents must relocate for work. It doesn’t matter if the residential tax rate is lowered if the population decreases, too.
The “best” case scenario of implementing Motion 31? Businesses likely won’t consider establishing new operations in our province because of the high taxes, and New Brunswick’s economy remains stagnant. The worst-case scenario? To avoid the new tax, existing businesses move their operations to lower-cost provinces or to the United States, and New Brunswick will lose jobs and the tax revenue to other jurisdictions. In that case, we all lose.
What is NBBC Doing to Oppose the Tax?
The New Brunswick Business Council (NBBC) is committed to growing the provincial economy—without sacrificing commercial/industrial businesses and their operations.
Public hearings re: Motion 31 were held in the legislative council chamber of the Legislative Assembly Building in Fredericton between September 4-5, 2019.
In a presentation to the Standing Committee, Adrienne O’Pray, CEO of NBBC, spoke about how opposing this tax is critical for New Brunswick to remain a competitive place to do business. Instead, we should examine other broader tax reforms, encourage investment in the New Brunswick economy to grow the private sector, and improve the productivity and competitiveness of NB companies by encouraging investment in automation.
It’s ill-advised to make a change to the tax treatment of business property taxes without considering the economic risks that come with eroding business competitiveness. Major changes to tax policy need to be developed in the context of the full suite of taxes levied by municipal, provincial and federal governments and not as one-off changes.
Motion 31 will penalize businesses for investing in themselves and New Brunswick. This new tax threatens to make New Brunswick the least lucrative province in the country for companies to do business by discouraging investment in machinery and equipment.
Government’s role is to promote investment NOT deter it. Why would we make it even harder to do business here?
It is becoming increasingly difficult to compete from New Brunswick. Other jurisdictions are offering a more competitive business environment. Since 2008, New Brunswick has been experiencing a loss of its capital stock–machinery and equipment in particular. Investing in automation in NB is critical to allow companies to remain in NB and attract new business to the province.
Between the increases in minimum wage, Federal CPP contributions and WorkSafe premiums (a 56 per cent in just one year), along with the highest Carbon Tax on fuel, diesel and aviation fuel in Atlantic Canada, it is becoming increasingly difficult to competitively do business in New Brunswick. There are higher recruitment costs in NB than larger centres, deterring companies from hiring from abroad. Investing in automation equipment is another viable way to help counter this labour shortage.
The newly proposed tax will also work against strategic initiatives to encourage business growth in the region. It is completely contrary to the Liberal’s “Economic Growth Plan” which indicated New Brunswick has a major capital challenge and needs to attract private-sector investment. The plan identified that “Annual private-sector capital expenditures between 2012 and 2015 were down by $1.2 billion per year compared to 2006-08 (a 40 per cent decline). This is one of the main reasons for the recent weakness in our economy.”
Learning from Others Who Have Been Down This Road
Other jurisdictions have examined or implemented a tax on Machinery & Equipment, and ultimately scrapped it because of the negative impact on new investment. Every province except Alberta has abandoned the policy; Alberta’s biggest municipalities (Edmonton and Calgary) do not apply this tax to industry either. Source: Turner & Drake, 2019
Let’s give New Brunswick entrepreneurs a reason to invest in their businesses. Let’s not give them a reason to leave. Let’s work together to show companies looking to expand in Eastern Canada that New Brunswick is the best place to invest for growth.