If it walks like a tax, smells like a tax ...: It probably is a tax

National Post


A tax by any other name is still a tax. This truism was demonstrated yet again
in Ontario's provincial budget earlier this week when the government introduced
a new health care tax, masquerading as a "premium."

This choice of terminology was clearly thought to be more palatable to
placate what the government must have known would be an enraged electorate.

But if we go back in history, referring to a tax by another name is not new.
Take Ontario's Fair Share Health Care Levy (FSHCL) introduced in 1996. As the
government stated at the time "this levy replaces and expands the existing
surtaxes on Ontario income tax."

The "levy" was nothing more than a new, revamped, two-tiered surtax,
calculated as a percentage of basic Ontario tax in excess of specified amounts.
Last year, the Ontario government seemingly abandoned the term "levy" and began
referring to it simply as a surtax.

The most notorious example of government disguising a tax by calling it
something else is the Ontario probate fees, which were struck down in 1998 by
the Supreme Court of Canada in the Re Eurig Estate case as being illegal since
they were essentially a "tax."

This was quickly corrected by the Ontario government, which introduced
retroactive legislation imposing the "Estate Administration Tax" (appropriately
acronymed "EAT") to replace the illegal probate fees. Interestingly, even after
passing the new legislation, then-premier Mike Harris was adamant: "This is not
a new tax. This is putting into legislation what is already in practice."

In reaching its decision, the Supreme Court listed several criteria that made
the probate fees really look like a tax: The fee was compulsory and enforceable,
it was charged by a public body and intended for a public purpose.

But most importantly, the high court wrote: "...the probate levy varies
directly with the value of the estate. The result is the absence of a nexus
between the levy and the cost of the service, which indicates that the levy is a
tax and not a fee."

So, is Ontario's new health premium actually a tax. A premium is defined as
any periodic or other amount paid for a contract of insurance, which, given that
it's a health care premium, is presumably referring to Ontario's Health
Insurance Plan (OHIP).

The problem is that the premium is due even if you are not eligible for
health care services in Ontario.

In addition, the amount of premium varies based on taxable income. A taxpayer
who earns under $20,000 pays no premium while an individual who earns over
$72,000 will pay $750 annually.

And the final blow -- to "simplify compliance," the Ontario government will
ask the Canada Revenue Agency to collect and administer the premium on Ontario's
behalf and therefore the premium will be collected at source through payroll

As the government stated: "to ensure that employers do not incur added costs
to change their payroll systems, the premium would be included on pay stubs as a
component of the income tax withheld."

To modernize an old adage -- if it walks like a tax, smells like tax and
looks like a tax, then it's probably a tax.

GRAPHIC: Black & White Photo: Glenn Lowson, National Post; Greg Sorbara, Ontario
Minister of Finance, right, is greeted at Queen's Park prior to tabling the 2004
0ntario budget on Tuesday. He's flanked by Dalton McGuinty, Premier.