Law Times

Page 6 august 4, 2014 • Law Times www.lawtimesnews.com COMMENT Talking out of both sides ith First Nations having won some key court victories in recent months, the federal government looks to be responding (or at least appearing to do so) with new measures announced last week on treaty negotiations and reconciliation. Among the measures are new guidance for industry on consulta- tion with aboriginals and entering into more consultation protocols in areas such as resource development. They also include an effort to clarify the federal government's approach to helping resolve shared territory disputes related to resource development. It all sounds good, but it's interesting that while all of this is go- ing on, the federal government continues to spend large sums on liti- gating against First Nations over resource issues such as oil and gas royalties. According to recent figures provided to Parliament and re- ported by Law Times in June, oil and gas disputes have been the top spending item when it comes to Aboriginal Affairs and Northern Development Canada's use of outside law firms for at least the past three years (although the figures for 2013-14 were for just part of that fiscal year). A 25-year legal dispute with Alberta First Nations over oil royal- ties is a major item on the department's list of law firm spending. One First Nation in particular, the Samson Indian Nation, has been battling the government first over the interest paid on royalties it had been holding on its behalf and now on the price Canada had based them on during the 1970s. The First Nations lost on the interest issue at the Supreme Court of Canada a few years back but they continue to challenge the government's use of the lower domestic price of oil during that period, rather than the higher exported price, to calcu- late the royalties owing to the First Nation. The issue, of course, dates Tax hikes on agenda as Queen's Park wraps up quick session hat was quick. In just 10 days, the newly elected government of Premier Kathleen Wynne outlined its agenda in the throne speech, passed the budget, and then packed up and left the legislature until Oct. 20. In addition to the budget, the gov- ernment also used its majority muscle to pass Bill 26, the Taxation Amendment Act. It went through first, second, and third readings and received royal assent all on the same day. It creates two additional tax brack- ets as part of the budget plan to squeeze more money from higher-income earn- ers. It's also a foreshadowing of more tax hikes to come. The upshot, as accounting firm PWC points out, is that for those making be- tween $220,000 and $514,000 a year, the tax rate increases to 13.16 per cent from 11.6 per cent on income earned within that range. For those making between $150,000 and $220,000, the rate will be 12.16 per cent on income within that range. But here's the sting: PWC concludes that a fter factoring for Ontario's 56-per- cent surtax, the actual increas- es this year are 3.12 per cent for those earning between $220,000 and $514,000 a year (rather than the less than two per cent it appears to be) and 1.56 per cent for those mak- ing between $150,000 and $220,000. What does that mean? PWC estimates that if your taxable income is up to $200,000 a year, you'll pay an extra $780 in Ontario tax. At $400,000 of taxable income, you'll pay another $6,708. And from $600,000 to $1 million, you'll pay an extra $10,268 in income tax. Of course, that's on top of the federal taxes. I think both WestJet and Air Can- ada have seat sales coming up for those thinking of moving to Alberta where there are jobs for the whole family and a more forgiving tax re- gime. You might even bump into Jack Mintz, who holds the Palmer chair at the University of Calgary's school of public policy and is an eminent tax expert and commentator. Mintz opined recently in the National Post that Ontar- io's future is looking darker by the minute and that our current plan would see a re- turn to the Bob Rae NDP years in office of high deficits, debt, and taxes. The irony, as Mintz remarks, is that in 1991 Rae started from a stronger financial position and tried to spend his way out of the recession and failed. "By the time Rae was turfed from office, Ontario's net debt climbed to 30 per cent of GDP," wrote Mintz. "Ontario hiked taxes with the pro- vincial marginal tax rate on personal income climbing to almost 22 per cent." Under Wynne, the debt-to-GDP ra- tio is on course to rise to 40.3 per cent while debt charges will account for 8.4 per cent of total spending. This is just the beginning. By mak- ing a political point about high-income earners paying more, the government is opening the door to spreading the pain. Livio Di Matteo, a professor of ec o- nomics at Lakehead University, has also been sounding the alarm on Ontario's finances for many years. "Ontario is only able to sustain its large appetite for public debt because of historically low interest rates," he wrote in The Globe and Mail last spring. "When they rise, growing debt ser- vice costs will crowd out other govern- ment spending." Ontario is in for a shock and sooner than we think. Either this government will start to seriously cut spending, which seems unlikely, or it will continue to raise taxes, which seems ever more likely. While those high-income earners may have to cut back on cigars and fine wines for a week or two, the real impact is going to be in fewer jobs and propor- tionately bigger tax hikes for the middle class. I bet those seats on the plane to Al- berta are filling up fast. LT uIan Harvey has been a journalist for 35 years writing about a diverse range of is- sues including legal and political affairs. His e-mail address is ianharvey@rogers. com. ©2014 Thomson Reuters Canada Ltd. All rights reserved. No part of this publication may be reprinted or stored in a retrieval system without written per- mission. The opinions expressed in articles are not necessarily those of the publisher. Information presented is compiled from sources believed to be accurate, however, the publisher assumes no responsibility for errors or omissions. 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But with the government facing so many challenges over projects like the North- ern Gateway pipeline and with important rulings such as the recent Supreme Court decision on a boriginal title, it's clear it needs to take a different approach. Pouring money into fighting First Na- tions in court over so many years and on so many fronts isn't getting us anywhere. The government may talk a lot about reconciliation with announce- ments like the one last week, but its actions in court suggest otherwise. At the very least, it needs to be more consistent and probably go further than what it announced last week. — Glenn Kauth W Queen's Park Ian Harvey T

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