St. John's seeking legislation amendment
When it comes to taxation, one figure in the City of St. John's budget projections for 2010 stands out as an anomaly.
Residential, business and water taxes are all expected to bring in more revenue to the city next year, but its 2010 budget projections contains a line under the utility tax category showing a decrease in revenue of $1.2 million. The budgeted amount for 2009 was $6.7 million, but the target for 2010 is a lower $5.5 million.
Bob Bishop, the city's director of finance, explains the projected loss as arising from a dispute with "a major utility company" over the interpretation of the province's Taxation of Utilities and Cable Television Companies Act.
Bishop said utilities normally pay annual taxes based on their revenues for the previous year. The tax rate set by the province is 2.5 per cent of the utilities' gross revenues derived within each municipality.
In 2009, Bishop said, when one utility company paid its taxes to the city, it sent in a smaller amount without any explanation.
"After an awful lot of back and forth, we eventually discovered that they had reviewed the act and had determined, or at least their interpretation was, that the act didn't cover the provision of Internet services," Bishop said. "We're disputing that, but in the interim we have submitted a request to the provincial government for clarification within the act. In the meantime, we have to budget on a conservative basis."
Bishop wouldn't say which utility company has challenged the city on this issue.
However, he said, the city has contacted the Department of Municipal Affairs and has requested that the act be amended.
Other than an initial acknowledgment that the department is looking into the matter, Bishop said he hasn't heard anything further from the province.
He said there have been changes made to the act over the years to take into account the provision of satellite television services and cellphones, so this is not unprecedented.
The legislation was likely enforced before Internet services were available, he said.
"At that time, the Internet was probably only a gleam in Al Gore's eye," he joked.
Bishop said it's his understanding other municipalities throughout the province are in the same situation.
He said the issue also affects the provincial government because in unincorporated areas, the province collects the utility tax on its own behalf.
A spokesperson for the Department of Municipal Affairs confirmed the department has received representation from the city regarding concerns about the taxation of utilities and has requested that consideration be given to making an amendment to legislation.
"This is not a simple matter and any changes to legislation would have implications provincewide. In the interest of good public policy, we will review the issue and the legislation currently in place," the spokesperson said.
The provincial legislation currently defines a utility as:
‰ A person, firm or corporation that owns, operates, manages or controls in the province a cable television broadcast receiving undertaking with equipment and facilities for receiving and redistributing television programming and non-programming services, for consideration paid by the user or consumer of those services;
‰ The Newfoundland and Labrador Hydro Electric Corp., a corporation continued under the Hydro Corporation Act and its "successors and assigns;"
‰ The Twin Falls Power Corp. and its "successors and assigns;"
‰ The Newfoundland Light and Power Co. Ltd., a corporation continued under the Corporations Act and its successors and assigns;
‰ A person, firm or corporation involved in the transmission, conveyance, communication, delivery or provision of telephone, telegraph and facsimile messages.