Excessive fees a rebuke to legislative power

When times are tight in government, all sources of revenue come under greater scrutiny. Just as governments have an incentive to cut spending, they have a greater incentive to increase revenue. Increasing taxes is always an option but can be politically unwise. Joseph Necker, who served France’s monarchy prior to the French Revolution, observed that being finance minister was like plucking a goose for its down in that “you want the most amount of feathers with the least amount of hissing.”

In Canada, taxes can only be collected if there is an annual vote of “supply” in their respective legislatures. This is a public vote and, as history reflects, governments can fall if they fail to carry the day on this measure.

But there is another source of revenue that is becoming more important for the government of New Brunswick – a source that is less open to scrutiny and can be changed by cabinet without the approval, or even the awareness, of the legislature. I refer, of course, to the fees that need to be paid for a variety of licences, permits and other administrative items that are part of our daily lives.

While these fees are originally based in a law passed by the legislative body, they can be raised (or lowered) by an order-in-council, a resolution of cabinet. We are informed of these changes, either in a budget speech or press release, but there is no legislative vote to approve these changes.

Since the origins of the British parliamentary system, it has remained a constitutional norm for the executive to seek and obtain annual approval for the budgetary policy of the government. This now leads us to present-day New Brunswick. Much has been made of the recent fee hikes that are occurring across the board. Hunting licences, fishing licences, building permits, licence plates – almost every fee currently charged by the provincial government has been increased by multiples of the rate of inflation.

With a $500 million deficit, the New Brunswick government needs all the money it can get. By increasing fees and other administrative charges, which does not need debate or a vote in the legislature, they are able to get that money. Perhaps this is a way of “getting more feathers with less hissing.”

However, there are limits to the way that government can use fees as a source of revenue. First, a fee that is collected in relation to a service must, in principle, be used to defray the cost of providing the service and not used for any other purpose. The money collected from a hunting license must be used to recover the cost of enforcing wildlife regulations. The money from a building permit must be used to finance building inspections or other directly related activity, and so on.

It is when the money obtained from administrative fees exceeds the cost of providing the related service that government gets itself into trouble. The Supreme Court of Canada in their 1998 decision regarding the Eurig Estate found that any fee that exceeded the cost of providing the service was not a fee at all, but a direct tax. As such, this tax would only be valid if passed by the legislature and could not be assessed by cabinet acting on its own.

One consequence of this judicial decision was that the government of New Brunswick was successfully sued for “unconstitutionally collected taxes” in 2007. Since then, officials within the New Brunswick government apply the “Eurig Test” to fees to ensure that the amount collected does not exceed the cost of related service. However, this is just an administrative step whose authority derives from the desire to comply with a judicial decision.

With the recent debate in the New Brunswick legislature about how money raised by service-specific fees has been used for different purposes and the increased use of fees as part of government revenues, if only as a means of cost recovery, we need to go a step further to ensure that fees are not abused as a revenue source.

A bill should be passed by the New Brunswick Legislature to enshrine the principles highlighted by the Eurig case into law. The principle is simple – no fee should exceed the cost of providing the related service. Further, if the total amount raised by these fees exceeds the amount spent providing the service, then the fee should be automatically reduced and the excess rebated to the fee payer.

Not only would this respect the principle of parliamentary approval regarding revenue and expenditure, it would prevent the abuses that naturally derive from too much executive control of government.

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This article was originally published in the March 11, 2014 edition of the Telegraph-Journal.