It's tax man versus machinery in New Brunswick - can there be a winner?

As many New Brunswickers are aware, property tax has been a hot topic in the media for the last number of years. There have been many notable stories that we could discuss in length but as of late there is one dominant theme: the proposed taxation of machinery and equipment.

PART 1 – BATTLE OF THE TAXES

Some readers may recall we had published an earlier article on this found here. The City of Saint John, seemingly on a never-ending brink of financial crisis, has been at the forefront of much the turmoil. This along with some of the highest tax rates in the province (and nationally for that matter), combined with a highly commercial and industrial dependent economy, have made for some political fodder both on the municipal and provincial fronts. This has many stakeholders in the province concerned, as not only is Saint John one of New Brunswick’s preeminent economic centres but taxation is legislated provincially. As such, the implications of major property taxation reform (such as the potential new inclusions of machinery and equipment), or otherwise, are far reaching.

PART 2 – THE REINCARNATION OF BILL 9 AS MOTION 31

In this article, we look to re-focus to the implications of assessing machinery equipment in New Brunswick (NB). Taking a step back, it’s helpful to understand some of the recent history as well as some of the politics. As outlined in our earlier article a proposed Bill 9 “An Act to Amend the Assessment Act was introduced to the legislature committee and was read for the first time on December 12, 2018 as part of the 59th Legislature.

The purpose of the bill was a proposal to allow taxation of machinery and equipment in the province. The most obvious effect of Bill 9 would be higher taxes imposed on many commercial and industrial businesses and their operations. This bill was introduced by a former City Councilor from Saint John (Honorable Mr. Jerry Lowe), who was recently elected as a Liberal Member of the Legislative Assembly (MLA). We only mention political affiliation as it is worth noting that NB is currently in a minority government inclusive of four political parties with an unusual distribution of seats. The Progressive Conservative Party holds 22 seats, the Liberal Party has 21 seats, and the People’s Alliance and Green Party each hold 3 seats. Needless to say, this generally necessitates cooperation “across the floor” to pass law.

In the case of Bill 9, in order to be effective, it was required to pass a second hearing, the committee stage and a third passage stage. This was a private members bill and after introducing it, the MLA was informed legislative tradition dictates bills dealing with taxation must originate with government. As such, the bill was facing a dead end and was subsequently withdrawn in March of this year. But the proposed changes did not die there. Motion 31 was then introduced by the same MLA and was supported by the People’s Alliance and Green Party on March 28, 2019 to the Legislature’s law amendments committee for study and hearings. Motion 31, is reproduced as follows:

Image of Motion 31

Motion 31
Source: https://www.gnb.ca/legis/business/currentsession/59/59-2/order-e/o190327e.pdf

PART 3 – CHANGE IS THE ONLY CONSTANT

So, what’s next?

Hearings are scheduled for early September where we expect to hear from various experts and stakeholders on property taxation within NB. Although municipal financial problems are not altogether a unique phenomenon, the motion does reference a of couple studies particular to Saint John’s woes so we do expect these to be of central focus.

The first study was a report titled “Municipal Property Tax Issues in the City of Saint John” commissioned by the City authored by Harry Kitchen and Enid Slack submitted in August of 2017. The report is too lengthy to post on here, however, the 84-page report outlines 10 issues that cover everything from tax classes, to tax rates, to tax exemptions and much more. A second report titled “Fair Property Taxation” was authored by the Saint John City Manager dated October of 2017. This report included various recommendations including some rather significant changes mostly centered around municipal control over tax classifications and levies that would involve legislative change. The hearings are also expected to focus on such questions as to why the region’s hospital is assessed higher than the country’s largest refinery and other heavy industrial properties.

It is apparent the saga that is property taxation in NB will continue to incite much debate and that the future is rather unclear. In the near term, these hearings will be of interest as ultimately there could be significant consequences to the taxpayers in NB.

Altus Group will be keeping a keen eye on any developments as they unfold. For any assistance or questions surrounding property taxes in NB, please do not hesitate to reach out to one of Altus Group’s local Tax Experts in Atlantic Canada.

An earlier version of this article appeared in the July/August CPTA newsletter.

Published on August 9th, 2019 at 11:00 am