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Tuesday, December 5, 2017 - 10:24

Discussion A - OPTIONS FOR SHORT TERM FINANCIAL HEALTH

The Government of Yukon anticipates a significant shortfall of money (deficits) in the coming years, where the spending levels are higher than the anticipate revenue. The Panel has developed the following options to improve the currently forecasted budget deficits: Option 1: Restrain Spending Growth In order to achieve a balanced budget by 2020, the Yukon government could restrain spending growth by limiting spending increases to 1% per year. Alternatively, a more relaxed approach with spending growth capped at 2% per year would balance the territorial budget by 2022/23. Option 2: Increase Government Revenue The Government of Yukon could establish a territorial sales tax. A sales tax would address near-term fiscal challenges and would grow with the territory’s GDP. Each 1% increase in the sales tax would raise an additional $7 million per year in government revenues. The revenue collected from a territorial sales tax could be redistributed through lowering personal and business tax. Additionally, visitors to the Yukon would contribute a substantial share of the sales tax revenue, perhaps in excess of 25 cents of each dollar collected, and therefore Yukoners overall would pay less tax. Option 3: Combine New Revenues with Spending Restraint There is an opportunity to combine both Option 1 and 2 where the outcome of a balanced budget would be achieved sooner as well as the costs of the change are distributed more equitably. The Government of Yukon could combine new revenues and spending growth by:
  • Capping spending growth at 2% and introducing a 4% territorial sales tax in order to balance the territorial budget by 2020/21.
  • Capping spending growth at 1.5% and introducing a 4% territorial sales tax in order to balance the territorial budget by 2019/20.
  • Capping spending growth at 0.5% and introducing a 2% territorial sales tax in order to balance the territorial budget by 2019/20.
Option 4: Do Nothing Doing nothing, as proposed by the Panel, is the final option that suggests there is an opportunity to accept the status quo and take no deliberate action. The Panel’s draft options highlight the Conference Board of Canada’s Territorial Outlook Economic Forecast which anticipates mining activity to grow and large scale activity to begin – both of which will have positive impacts on increasing revenue from 2018/19. The Panel also notes the risk of doing nothing. If increasing revenue does not materialize, Yukon’s fiscal situation will become more difficult to manage at a later date.
What do you think?
  • What pros, opportunities and benefits are associated with these options?
  • What cons, challenges and limitations are associated with these options?
Richard
Department of Finance

Comments

egras
Tuesday, December 5, 2017 - 11:31
Capping spending growth at 0.5% and introducing a 2% territorial sales tax in order to balance the territorial budget by 2019/20.- I like this one.
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takhininurse
Tuesday, December 5, 2017 - 11:34
Cap spending growth at 0.5% and introduce a 2% territorial sales tax.
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pirh50
Tuesday, December 5, 2017 - 14:05
NO sales tax or debt. Increase business growth and increase revenues. Do not spend if there is no revenue stream to pay for it.
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Forest
Tuesday, December 5, 2017 - 14:29
My suggestion is to end the subsidization of oil and gas (propane) consumption in the Yukon. Currently we give anywhere between $10 and $20 million dollars worth of subsides to use of oil and propane in the Yukon. And the perversity of this subsidy is 1) we don't produce any of these resources, so no benefit to Yukon; and 2) we have safer, cleaner made-in-Yukon alternative to these fuels for many of the uses (e.g. space heating). Currently we have the lowest fuel tax in Canada and we fully exempt tax on propane! Our fuel tax is HALF of what Alberta charges, and they actually make the stuff. Ending the subsides on fuel alone could cut the projected deficit by almost half. I've started writing this up in a bit more at: http://forestpearson.blogspot.ca/2017/09/an-idea-to-help-balance-yukons-books.html , but if you want more specifics, reply and I can add more details.
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John
Tuesday, December 5, 2017 - 14:33
It's great to see these kinds of discussions. These draft options all involve trade-off's, and the more discussion, the more likely we are to make the right choices.
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anonyukon1
Tuesday, December 5, 2017 - 14:35
I think that a shift from taxing income to taxing consumption is valid. I also think that there are many ways government could be saving money or spending more wisely and looking at reducing subsidies to the wealthy and its own employees. Here are some suggestions: 1. Stop lowering corporate taxes rates. Most corporations in the Yukon are sole proprietorships - lowering this tax rate just puts more money into the pockets of doctors, lawyers and accountants and doesn't do much to generate employment (the supposed goal). 2. End the subsidization of energy consumption. If we really want to incentivize people to use less fossil fuel and save energy, then why are the taxes on fuel so low and why is does government subsidize all of our electricity bills? At the very least, these measures could function as credits and be means-tested. Use the money to encourage people to better insulate their homes, ride the bus, buy more energy efficient cars, etc. 3. Means-test social programs like continuing care - why should rich Yukoners get to grow old at taxpayers expense? Likewise for Pioneer Grant. 4. Amateur athletes who can afford to travel out of the territory to participate in sporting events can apply to Lotteries Yukon for a $200 subsidy for their travels, even adults. Does this really make any sense? Bingo revenues spent on the rich. 5. Stop subsidizing the property taxes of people who live on the outskirts of Whitehorse. Assessed values there were lowered by government by about 25% about 10 years ago - this is lost revenue and unfair to all of us who don't live in this (vote-rich?) zone. 6. A universal home-owner's grant? Really? Our property taxes are already low, compared to many other jurisdictions and we receive 500 bucks a year from Yukon government to make them even lower? Do we really still need to encourage home ownership in the Yukon? Another give-away to the wealthy. If it stays in place, it should be means-tested. 7. Why do we have a mortgage assistance program for those that banks won't qualify for mortgages? Why is government stepping in to assume risks that the banks won't? Shouldn't we leave decisions about credit-worthiness to banks? As a taxpayer, not pleased that government is taking this level of risk with my tax money. Finance dept. does not have a great record when it comes to taking risks - lost millions on asset backed commercial paper not so long ago. 8. The massive subsidy to the placer industry should end. Raise the royalty rates so there is at least some money to address the widespread devastation to Yukon's environment caused by this industry, which seems to attract many Albertans and Alaskans who don't pay income tax in the Yukon in the first place. 9. Implement planning, evaluation and reporting in government. How do we know that any of the money that is being spent is achieving results? And why do we spend millions making plans, then disregard them? Case in point: Alaska Highway corridor plan - high priced consultants and highways staff spent over a year identifying needed improvements to highway in Whitehorse and building is now happening on some of the lowest priority areas. Millions being spent on upgrades like passing lanes and intersections not identified as big problems. 10. Through operation of the TFF, Yukon is penalized for its low effort in sales taxation. This is a cost to Yukoners. Start taxing consumption while lowering the tax on income for lower income brackets. 11. Implement better controls and oversight of government staffing. Too many cases of people hiring their unqualified friends for high-level jobs. And should senior hires be promised that their spouses will receive government jobs as conditions of employment? At the same time, our hospital has had no new hires for many years. 12. Government has very high rates of people on long-term disability - this is very costly. More needs to be done to ensure people don't end up in that situation. Need to train managers in YG in HR management, workplace values and ethics and conflict management. 13. Should government employees get free plug-in parking at taxpayer's expense? City rents out downtown parking spots for 200 bucks a month in its lots behind Main Street, but throughout the downtown area, hundreds of YG employees enjoy that benefit for free as a tax free benefit. Is it any wonder we have "traffic jams" at "rush minute" and nobody rides the bus? These are just a few examples of where some belt-tightening could happen without too much pain. None of these measures on their own will generate millions, but every penny counts. It will take some political fortitude to reduce some of these entitlements, but we will all benefit in the long run.
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Elizabeth
Tuesday, December 5, 2017 - 14:39
The panel suggests a "stop government spending growth" option, but they don't provide an option to decrease spending, and in the long term, decrease government growth. I am a long time Yukoner, I have worked in government and in the private sector. The primary reason that I left the government was that I could not stand the inefficiency and waste of funds. Departments are under the belief that if they don't spend all of their funding each year, it will be clawed back the next year. Whether or not this is true, I don't know, but it gives no incentive whatsoever for departments to be fiscally responsible. Anyone in the private sector who benefits from government spending will agree that March is a great month for getting government contracts as every department is desperately trying to spend what they have on hand before the year end. If there were some sort of incentive for those same departments to come in under budget, maybe the government wouldn't have a spending problem. If someone has a spending problem, the first advice they get is to look at their budget, tighten their belt and curb their spending. I think it is ludicrous that an option is to raise further revenue to feed the out of control spending.
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David Trick
Tuesday, December 5, 2017 - 14:41
I hope the Panel will continue to push strongly for YG to adopt consolidated accounting. The current mix of consolidated and unconsolidated figures gives the YG an impossible communications task. No government can pursue two different deficit targets at the same time. YG needs to pick one deficit target and mobilize its energies to meet the target. As the panel shows on pages 27-29, the deficit problem described in the government’s Budget documents is much smaller when expressed as a consolidated deficit. In discussing this issue, the panel might answer two questions: Which presentation (consolidated or unconsolidated) complies with the standards set by the Canadian Institute of Chartered Accountants’ Public Sector Accounting and Auditing Board? Which presentation gives the best measure of how quickly YG is approaching the $400 million debt limit set by the Government of Canada?
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