[HALIFAX, NS] — Last night, Nova Scotia budget Premier Darrell Dexter made a surprise promise to remove the two percentage point increase in the harmonized sales tax that his government brought in two years ago.
In a statement, Dexter says the NDP would take the sales tax down from 15 per cent to 13 per cent in two stages by introducing legislation this year to reduce the sales tax by one percentage point in 2014 and another point in 2015.
Dexter said in an interview that "in all likelihood" the tax decreases wouldn't occur until after the next provincial election, which must take place before June of 2014.
The premier was planning to deliver the promise during a speech in the legislature on Monday but the opposition parties spoke late into the night in their reply to last week's throne speech.
Dexter said reducing the tax has to wait until 2014 because of the province's deficit.
"That is when the province will have the capacity to do that (make the cut) without going into deficit," he said.
Progressive Conservative Leader Jamie Baillie dismissed the NDP promise as an election stunt.
"It's an NDP tax promise that comes with a big asterisk, and that is that you have to re-elect them first," he said. "Nova Scotians have been down this road before with the NDP who broke their last promise on taxes right after the election."
Both opposition parties have claimed the NDP broke a 2009 election promise when they put the two percentage point increase in the HST in place in July 2010.
Finance Minister Graham Steele has also promised "modest but real" income tax reductions in Tuesday's budget, but he hasn't offered any specifics.
Liberal Leader Stephen McNeil said the impact of any tax cuts in the budget are diminished by the millions of dollars Nova Scotians have provided to the province since the sales tax hike was brought in.
"He (Steele) has been offering pennies back to Nova Scotians," McNeil said Monday in an interview before the NDP made the HST promise.
Baillie said the government should eliminate its projected $260.8 million deficit immediately.
"A better way would be to balance the budget first, and lower taxes now so they could be truly judged on their record and not on another cynical pre-election promise."
Steele said the government has a plan to balance the books by next year.
"We do what we can afford," said Steele, who defended the 2010 increase in the HST. "It is necessary in order to continue to provide important public services."
Steele said the two percentage point increase was worth about $360 million a year to provincial coffers.
"So it kind of goes without saying that before you can reduce the HST by that amount you have to be running surpluses. Our plan has us getting back to balance next year and then running surpluses after that."
Finance Department figures show that the total revenue generated from the HST has increased since the 2010 hike from more than $1.1 billion in 2009 to a forecast of more than $1.5 billion at the end of fiscal 2011-2012.
But Don MacIver of the Atlantic Institute for Market Studies said the original increase in the HST put the province at a competitive disadvantage.
"It sends the wrong message," said MacIver. "It simply says we can manage to maintain our spending levels by adding a little bit here and a little bit there in terms of our tax take."
Steele made another pre-budget announcement Monday, saying the government would cut the small business tax.
He said the tax would drop by a half percentage point to 3.5 per cent, a move that would save small businesses $10 million annually. It's the third straight year the government has lowered the tax by half a percentage point.