Perhaps it is a measure of how desperate the Liberal Government is to raise money at all costs – there is no other logical explanation of the CRA’s latest foolishness.
In many jurisdictions, including Ontario, municipal services for smaller communities are centralized in one service board and the expenses are shared among the communities based upon their use of the various services.
In Ontario, in 1998, such a system was implemented. The Government of Ontario explained it as follows:
Consolidated Municipal Service Management
The fundamental role that will be assumed by the municipalities and municipal service boards as a result of consolidation will be management of the system of services within their area. These municipal service managers will be accountable to the province for management of these programs within the policies and standards established by the province.
The municipal services managers will also administer cost-sharing arrangements with the province for Ontario Works, the Ontario Disability Support Program, and child care. They will also administer cost-sharing arrangements between the Federal government and the province for social housing. The provincial-municipal arrangements for social housing will be based on a framework of legislation and regulations.
The municipal services managers will be responsible for determining, within provincial policies, the most effective approaches to delivering services to clients in their area.
This is designed to efficiently deliver various municipal services without duplicating bureaucracy and administrative expenses. The service board administers the services and the municipalities reimburse the service board for their share of the expenses.
The Canada Revenue Agency has now decided that the reimbursement by the various municipalities are a taxable service delivered to each of the municipalities and are, therefore, subject to GST/HST.
This is especially ludicrous given that the services themselves are not taxable.
I personally know of one instance where the CRA is looking for over $500,000 in HST and is threatening penalties for gross negligence.
Recently, Arnold Viersen, Conservative MP for Peace River, wrote to the Minister of National Revenue indicating that this latest CRA project has resulted in an assessment of the Town of Peace River for an amount in excess of $400,000. A copy of Mr. Viersen’s letter is found here.
Now, in addition to attacking the middle class and small businesses, the Liberals are attaching smaller municipalities taking part in provincial government-mandated programmes to deliver exempt services to their citizens.