The Town of Peace River is continuing to fight an unexpected $600,000 GST bill that could have serious implications for other municipalities across the province, and even across the country.
“The federal government has deemed that transfers between municipalities for the provision of services or grant funding are taxable. Traditionally they have been treated as exempt,” Greg Towne, Director of Corporate Services & Economic Development, said in a recap of the issue at the regular town council meeting August 12.
“This has a significant impact not just for us but every municipality in Canada if this is allowed to go forward. Our position remains that this should be an exempt type activity and not subject to taxation,” he said.
The Town received the new tax bill after a recent audit which deemed the taxes are owing due to a non-discrimination clause in the intermunicipal agreement signed by Peace River and neighbouring municipalities, despite the fact that the exact same intermunicipal agreements were in place during a previous audit in 2011.
Of the $600,000 in GST the CRA now says the Town owes, $400,000 is GST on the $8 million in donations given by other municipalities towards the new Peace Regional Recreational Centre, set to open this fall.
While clause 146(e) of the Excise Tax Act says something is taxable if it is a “a supply of a right to enter, to have access to or to use property of the government, municipality or other body,” the Town argues the $8 million in donated funding for the new multiplex does not supply a right to neighbouring municipalities to access the new facility since there is a single user rate for everyone regardless of where they live.
Since the last council meeting, the Town has been working on several fronts to rally support to fight the bill and the seeming policy change at the federal level.
“The Federation of Canadian Municipalities (FCM) have received a package from the Town, and they’re probably the most interested group at this point. Their mandate is to represent municipalities across Canada, they see the potential impact of allowing this ruling to stand,” Towne said.
“They’re willing to throw their own money to assist in the review of this whether that’s independent or in conjunction with ours,” he said.
“They are looking to provide input, strong input I would suggest into this matter.”
Towne said Peace River has also contacted the Rural Municipalities of Alberta (RMA), Northern Alberta Elected Leaders, and the Northern Alberta Development Council (NADC) among others.
Alberta Municipal Affairs has also been in contact with the Town of Peace River.
“They are again concerned and are looking to develop a position to work with either existing groups or the Minister to alleviate this issue,” Towne said.
Towne said administration has sent correspondence to every municipality in Alberta outlining the issue, and is starting to receive replies expressing concern about the potential impacts and asking for more information.
“There’s also similar cases where we’ve done some other investigations and we’ve found agreements, and this one from the Town of Olds, which has an existing agreement which contains identical wording to Peace River. So we’ve reached out to Olds to see what’s the status, have they ever been audited, has this ever been an issue for them, could it become an issue for them. So again we’re just sort of doing our due diligence to see if this has been reviewed before and if this is a case of an auditor who may or may not have gone too far,” Towne said.
AUMA has been very active in working with the Town about their concerns, including requesting permission from the Town to contact their auditor, a request Peace River has granted.
“They are working with KPMG, another audit accounting firm, to conduct another review and will advise the Town on the outcome,” Towne said.
AUMA is also working with the FCM legal departments to share information and discuss options, and is providing Peace River with a list of potential people to approach for advocacy help.
After hearing the review of the situation and actions taken to date, council voted to approve a motion to submit an extraordinary resolution to the AUMA to be considered at their conference this fall. AUMA had already approved the draft resolution.
Northern Sunrise County, who contributed a significant donation to the Peace River multiplex project, also discussed the issue at their regular council meeting August 13 in response to a letter from Town of Peace River CAO Chris Parker.
The county’s $6 million in capital cost contributions to the new Peace Regional Recreational Centre have since been reassessed as taxable in the Peace River audit.
“This is crazy,” said Deputy Reeve Norm Duval.
“This is a concern” CAO Cindy Millar told council
“Moving forward, you know we are mandated by the Municipal Government Act (MGA) to have intermunicipal collaboration framework agreements for the provision of services with our partners.”
“I do think we need to advocate,” she said.
Reeve Carolyn Kolebaba suggested Northern Sunrise County contact the Rural Municipalities of Alberta (RMA) about the issue.
“Do we pay GST?” she asked.
“Not yet, but depending on how this moves forward, they could be mandated for our service agreements for provision of charging GST and then we have to submit for the reimbursement of it,” Millar said.
“Are they wanting to come back to all municipalities and nail us all now?” Reeve Kolebaba asked.
“We have no idea,” Millar said.
“And if you read the letter that’s the implication,” Deputy Reeve Duval said.
“They could easily go into another municipality, or anybody. There are a lot of cost sharing agreements across the province.”
Council voted to write a letter to RMA outlining their concerns, and to ask for an RMA resolution on the issue.
Meanwhile, Peace River-Westlock MP Arnold Viersen has written to the Minister of National Revenue, the Honourable Diane Labouthillier, to seek answers.
“I am concerned by the recent direction Canada Revenue Agency (CRA) has taken regarding their new policy of charging municipalities Goods and Services Tax (GST) on their cost-shared infrastructure projects,” Viersen wrote in a letter to the Minister of National Revenue dated August 8 that was also posted to his official Facebook page.
Viersen’s letter explained the Town of Peace River put forward $18 million of the funding for the new multiplex being built in town, while $8 million came from surrounding municipalities.
“Signed agreements among all the participants were already in place when the CRA appears to have changed the rules. A recent CRA audit resulted in a $400,000 additional tax burden for the Town of Peace River on this project alone,” he wrote.
“As this is unprecedented, I want to understand the scope of this new CRA decision and how it will apply to the many municipalities in my riding, as well as from coast to coast.”
The Town of Peace River is still being assessed $1000 interest per month on their outstanding tax bill.
Their resolution on the issue will be reviewed at the AUMA conference in September.