November 17, 2010
Just Another Brick?
Brad Wall finds himself in an interesting position after the BHP Potash takeover rejection
With the BHP takeover of Potash Corp almost certainly killed by the Federal Government, Premier Wall, who almost single-handedly drove the decision, finds himself at a fork in his political journey. He’s popular and powerful, inside and outside the province, even by his own mercurial standards. He’s also offended ideals and people with whom he’s supposed to be aligned.
Eastern columnists comparing him to banana republic dictators are one thing, but the Saskatchewan Chamber of Commerce have wondered publicly (and quite reasonably) about the exact location of the new line between being “open for business” and “protecting strategic assets.”
Putting two and two together, Wall can now promote some long overdue policy changes with his new political heft and, at the same time, signal to his supporters and the world that Saskatchewan certainly does remain open for business. Following are three such changes that he might promote:
First and foremost are Saskatchewan’s taxes. Wall has said he will not introduce a Harmonized Sales Tax in this legislature, but with Ontario, and B.C. introducing one, Saskatchewan inhabits an increasingly shrunken universe of overly complicated taxation systems with PEI and Manitoba. These deliver few benefits other than privileging some sectors that are currently exempt from PST but would have to pay HST. To avoid B.C. premier Gordon Campbell HST travails he should lower the rate to keep the tax take neutral and build broad support for it by offering to share a point with all local governments.
To match Alberta’s business friendliness, Premier Wall needs to understand the importance of company and personal tax rates. In the company rate department, Saskatchewan companies pay a two per cent premium, twelve per cent here and ten there. With personal taxes, it’s an eleven-thirteen-fifteen staircase here and a flat ten there. He increased government expenditure in his first three years faster than the New Democrats did in their last three, and made tax changes which actually steepen our staircase (raising the personal and child exemptions in 2008). Premier Wall should capitalize on his popularity and political room to move by matching Alberta’s rates on company and income tax.
Lower and flatter rates are not only possible, but would make the Saskatchewan investment environment more competitive and send that message that Saskatchewan means business.
The Canadian Wheat Board’s monopoly on marketing wheat would make an excellent target for Mr. Wall’s out of province clout. Every rural riding in Saskatchewan votes for a member of parliament who opposes the monopoly, to which eastern growers are exempt. Such an arrangement may have been understandable long ago when isolated farmers with limited transport and communication needed strength in numbers to deal with the grain barons, but no longer.
Today the average bushel of Saskatchewan wheat is produced by somebody akin to a medium sized business owner able (and most of them very willing) to market their own wheat their own way. Accusations of poor grain marketing abound, and Western Canada noticeably lack secondary industries based on Wheat (for example, pasta manufacturers), arguably due to the inflexible channels through which wheat in this province must be distributed.
Slightly further from home, Canada’s supply management model for milk, eggs, and poultry is a lose-lose proposition for Saskatchewan.
By limiting the amounts of these products produced in Canada, then using tariffs to keep more from coming in from abroad, the Federal Government has served up a lucrative monopoly to (mainly) Quebec and Ontario producers.
The people of Saskatchewan are held back from entering these markets as producers, pay higher prices due to the lack of international competition as consumers, and lose out on international free trade deals that would benefit export-driven Saskatchewan. Just last week the U.S. and New Zealand rebuffed Canada from the Trans Pacific Partnership – which may become one of the largest multilateral agreements in history--citing Supply Management
On this issue and the Wheat Board, Wall could and should use his power in influence to start pushing the debate toward more open markets.
Most of all, Wall needs to take a lesson from his political foes: When you’ve got political capital, use it. After snatching victory over the issue of privatizing Crown Corporations in the 2003 election, the New Democrats humiliated the Saskatchewan Party into voting for the Crown Corporation Public Ownership Act. As a result it’ll be nigh on impossible for any government to privatise a Crown Corporation in this generation. Wall needs to think in similar ways if he’s to have a lasting impact on the province.
direct the Centre’s Saskatchewan office from 2007 to 2011. He holds degrees in Electrical Engineering and Philosophy from the University of Auckland, where he also tutored Economics. In four years working for the Frontier Centre, David carried out extensive media work, presenting policy analysis through local and national television, newspapers, and radio. His policy columns have been published in newspapers in every province as well as the Globe and Mail and the National Post. David has produced policy research papers on telecommunications privatization, education, environmental policy, fiscal policy, poverty, and taxi deregulation. However, his major project with the Frontier Centre is the annual Local Government Performance Index (LGPI). The inaugural LGPI was released in November 2007 and comes at a time when municipal accounting standards in Canada must improve if the municipal government sector is to reach its potential as an economic growth engine for Canada. David is now a policy advisor in Wellington, New Zealand.