B6. Terrace Review — Rep by Michael Kelly > Canadians living in the north are going to be put at a considerable economic disadvantage if tax measures proposed by the federal government are put into action on January 1, 1991, a report by the Toronto consulting firm Emst & Young has concluded. The report, filed in October, was commissioned by the Conference of Northern Ministers, a group of federal Cabinet ministers from northern ridings. It forecasts the effects on the north of two tax proposals scheduled for the begin- ning of the year: the Goods and. Services Tax and changes to the Northern and Isolated Areas’ tax benefits, also known. as the Brunelle report, filed in October 1989, Emst & Young predict the GST will cost northerners more: than those living in the south on several ~ counts. Although the GST will be good for resource industries characteristic of northern com- Wednesday, December 12, 1990 munities: because exports are zero- rated ~- won’t have the GST - applied and will have the current Federal Sales Tax (13.5 percent) removed ~— the gains from more competitively-price products for international, markets will be. more than offset by the cost of the GST to northern consumers, businesses and public services. The GST legislation makes no distinction between people living in heavily serviced areas of the south who enjoy comparatively mild climates and those who live in the relatively isolated northern areas with severe climates. The Emst & Young report points out that the GST will be applied to virtually everything that already: ‘makes ‘the cost of living in -the north higher, like transportation . and heating costs, and because it is applied as percentage of cost nor- therners who are already paying more to live will be paying a dis- proportionately higher amount of tax. The GST will aggravate the economic burden of being 2 nor- = therner. The industrial climate will also suffer, Because the GST is applied to transportation, already a prohibi- tive factor facing industries located in the north, the GST will "result in a worsening of the competitive position of northern manufacturers who sell their products in southern Canada," the report says. Emst & Young also predict the following negative effects of the GST on the north: ‘Tourism — the relatively higher cost of going north for holidays will discourage Canadians from travelling in their own north. Fail- ure in the legislation to provide full GST credits for foreign tour- ists (the full credits are provided only by foreigners travelling on business) will hurt northern tour- ism operators. Retail — Having the GST applied _ to services as well as products will hurt service sector businesses, Local northern retail merchandisers will lose business because there will be a greater incentive for local ‘Where To Find It V consumers to buy from high- volume southern urban retailers whose costs, and consequently: GST payments, are lower. ‘Small business — Compliance costs (setting up GST accounting) will be higher in the north due to lack of professional advisory ser- vices. *Municipalities, hospitals and schools — These institutions will - get rebates for GST that they pay directly for goods and services, but removal of the Federal Sales Tax ~~ which did not apply to trans- portation — will not make up for the higher cost of transportation and higher local retail mark-ups in the north. *Transportation, energy and housing — These three categories of cost stand out in the north and are the primary concerns addressed in the report. "Both transportation - and energy represent a dispropor- tionate share of consumption in the north, and the essential expendi- tures on these items will be made more costly in the north as a result ort tells Ne ortherners to. brace of the GST," the report states. There is a provision in the GST for a rebate on new housing, based on the Federal Sales Tax currently applied to housing material costs, but the rebate won’t be enough to compensate for the GST-eligible transportation costs involved in northern housing construction. "The GST credit — Quarterly credit cheques will be issued by the federal government to people according to their income as a measure to offset the reduced purchasing power that the GST ‘imposes. The credits, however, will be the same for people of the same income level no matter where they ate living. A worker caring ~ $30,000 annually in the north will receive the same GST credit.as a worker earning the same wage in the lower-cost south. The effect won't be equal. The GST, however, is not the only bad tax news for people who jive in the north. The federal government is attempting to tinker Terrace =] Tree Trimming Will cut-down any tree!