05/02/2013 09:10 EDT | Updated 07/02/2013 05:12 EDT

Manitobans rally outside legislature to oppose sales tax increase

WINNIPEG - About 500 people gathered outside the Manitoba legislature Thursday evening to protest the province's planned sales tax increase.

Representatives of the Canadian Taxpayers Federation, restaurant owners and the opposition parties denounced the tax hike as a big blow to people's wallets.

They also blasted the government for changing a law in order to avoid holding a referendum that is currently required for any sales tax increase.

The NDP government announced in last month's budget that the provincial sales tax will jump to eight per cent from seven per cent as of July 1.

The government says the new money is needed to pay for schools, hospitals and flood-fighting projects.

But critics say the government should tighten its belt instead of raising major taxes for the second year in a row.

"The doubled our debt, they doubled their red tape .... and now they want to raise your (sales tax)," Opposition Progressive Conservative Leader Brian Pallister told the crowd.

"Consider the auto dealership or the building supply shop that's worried you're going to go to the States or to Saskatchewan ... before making a big purchase," said Janine Carmichael, Manitoba director of the Canadian Federation of Independent Business.

Under the province's balanced budget law, the government must hold a referendum before any increase to the sales tax. But the NDP introduced a bill last month that would eliminate the need for a referendum while raising the tax at the same time.

The controversy could make for a long spring sitting of the legislature. Manitoba is one of the few provinces with mandatory public hearings on all bills, and more than 100 people have already signed up to speak to the new legislation.