04/19/2013 12:41 EDT | Updated 06/19/2013 05:12 EDT

Law professor says there are legal questions about Manitoba's sales tax hike

WINNIPEG - A law professor says the Manitoba government appears to be contravening its own balanced budget law by raising the provincial sales tax, but would likely survive a court challenge because governments are usually free to rewrite their own rules.

"It could be that these (balanced budget) laws are more of a statement of principle or a symbolic statement than they can be strictly enforced in the courts," said Bryan Schwartz, a law professor at the University of Manitoba who specializes in legislative process.

"Which doesn't make them unimportant, because you would think that sometimes political honour counts for something, even if you can legally get away with something."

The NDP government introduced an omnibus bill this week that would do two things simultaneously — raise the sales tax to eight per cent from seven as of July 1, and eliminate the need for a referendum to approve the tax hike that is currently spelled out in the balanced budget law.

Under the current balanced budget law, enacted by the Tory government of the 1990s, the referendum must be held first — before a bill to raise the tax can be introduced in the legislature.

"The government shall not present to the legislative assembly a bill to increase the rate of any tax imposed by an act ... unless the government first puts the question of the advisability of proceeding with such a bill to the voters of Manitoba in a referendum, and a majority of the persons who vote in the referendum authorize the government to proceed with the changes," reads the law, formally called the Balanced Budget, Fiscal Management and Taxpayer Accountability Act.

The Canadian Taxpayers Federation said Friday it was "looking into" a possible legal challenge.

While the government's bill appears to violate the law, Schwartz said courts are generally loathe to prevent a government from amending its own laws, unless there are constitutional or Charter of Rights and Freedoms issues at play.

"It's certainly arguable that ... a court would not get involved in saying 'you had to comply with the earlier law before you passed the new law.'"

"The question is whether one legislature can tell a future legislature 'you have to go through the following procedural steps before you enact a bill.'"

Schwartz said there are precedents such as last year's battle over the Canadian Wheat Board.

The federal government stripped the board of its monopoly over western wheat and barley sales without holding a plebiscite among grain producers. Opponents took the issue to court, arguing the plebiscite had to be held first under the Canadian Wheat Board Act.

The Federal Court of Appeal rejected the argument by ruling that a plebiscite was only required for some changes, not the ending of the monopoly. But the court also said that even if a plebiscite was required, the government would likely be able to avoid holding one by changing the law as it sees fit.

Justice Robert Mainville, writing on behalf of the three-member panel, cited a long-standing tradition, as well as legal precedents, that prevent one government from limiting the powers of a future government.

"A provision requiring that legislation be introduced into Parliament only insofar as an outside corporation or small outside group agrees does not appear to me to be merely a procedural requirement. The effect of such a provision is to relinquish Parliament’s powers in the hands of a small group not forming part of Parliament," Mainville wrote.

Finance Minister Stan Struthers did not directly answer questions Friday as to whether he feels the tax-increase bill is legal. He said the tax hike is needed to fund flood-fighting projects and maintain government services.

"We know that this legislation puts us in a position to direct the money we bring as revenue towards very necessary investments," Struthers told reporters.

"We're very confident, as we move forward, that this is the right thing to do."

The NDP may be inadvertently undermining one of its own laws, Schwartz said. A 2001 law has a very similar requirement for a referendum to be held in the event that a future government wants to privatize Manitoba Hydro.

"If it's true that you can raise the retail sales tax without having a referendum ... than I guess it's arguable than you can privatize Hydro without first having a referendum."