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The Manitoba government plans to reduce the PST to 6 per cent.

Premier Brian Pallister made the announcement Thursday. The change will come into effect July 1.

Pallister also announced the government will implement its flat $25-per-ton Green Levy at the same time.

The province estimates it will save businesses and citizens more than $1 billion over the next five years, with the average household saving $359 a year with the PST cut.

Pallister says cutting the PST will save Manitobans $325 million per year — with the average household saving $359 in 2022 with the tax at six per cent. — Diana Foxall (@CJOBdiana) March 5, 2020

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Pallister, who has faced criticism from some supporters over his willingness to implement a carbon tax, said cutting the sales tax will help people and the economy.

While the federal government offsets its carbon tax through income-tax rebates, the province’s sales tax cut would be more immediate and helpful for people, he said.

“The PST dropping increases our competitiveness as a province, helps us achieve our job-creation goals, helps put more money disproportionately into households where there is less discretionary income.”

It is the second time Pallister has announced a cut to the PST. He reduced it to seven per cent from eight last year shortly before calling an early election.

‘We have no choice’

Calling it a made-in-Manitoba carbon levy, Pallister said the federal government “ignored” their attempt to work together on climate change.

“We have no choice but to act now to protect Manitobans from the rising federal government carbon tax they are bringing in this year,” he said.

Pallister said he wants to see special exemptions for the province due to our hydro-electric infrastructure.

Pallister originally planned a $25-per-ton levy in 2017, but withdrew it when the federal government said it was not high enough.

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Canada could be united in fighting carbon, but instead, Ottawa is fighting about carbon tax. Our Made-in-Manitoba Climate and Green plan in better for the environment, better for the economy, better for our children and grandchildren, and better for Canada too. #mbpoli #cdnpoli pic.twitter.com/1XH6E8NFCR — Brian Pallister (@BrianPallister) March 5, 2020

The federal government then imposed its own tax on Manitoba and three other provinces. That tax currently sits at $20 a tonne and is to increase by $10 a year every April until it hits $50 a tonne by 2022.

Pallister says Manitoba has a thorough plan to reduce emissions, including its carbon price, and Ottawa should respect it.

Just last week, the province filed written arguments in federal court to back its demand that the federal tax be struck down. A date for Manitoba’s challenge of the tax has not been set.

No formal proposal yet, say feds

Canada’s Minister of Environment and Climate Change, Jonathan Wilkinson told Global News the federal government is committed to working collaboratively with Manitoba, but hasn’t received a formal proposal for the plans Pallister announced Thursday.

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“Once we receive their proposal, we will assess it against the federal benchmark as we have done with proposals from all provinces and territories,” he said in a statement.

“The federal benchmark is $30 per tonne this year and increases annually by $10 per tonne until 2022. This approach was laid out in Canada’s national climate plan from 2016 that was negotiated with provinces and territories, and that approach has not changed.”

Wilkinson said the federal government and Manitoba’s government “have been engaging in ongoing discussions on how we can work together.”

“Ensuring that pollution pricing systems across Canada continue to meet the minimum federal standard is a core principle in our engagement with provinces in territories in order to maintain the fairness and effectiveness of pollution pricing in Canada.”

1:25 Reactions to Manitoba’s Green Levy Reactions to Manitoba’s Green Levy

One Liberal MP from Winnipeg told Global News Pallister’s announcement was “encouraging.”

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“At the end of the day we’ve argued that a price on pollution is the best way to deal with many of the concerns that Canadians, in particular Manitobans, have with the environment,” said Winnipeg North MP, Kevin Lamoureux, who wouldn’t speculate on what the prime minister will ultimately decide.

“What’s important is that we’ve got to recognize that the provincial levy has got to be equal to or greater than what other provinces are doing in Canada. And as long as that’s the case there’s no need for a federal levy.”

Pallister said he hopes the federal government will respect Manitoba’s plan, since his province has been much more open to a carbon tax than Saskatchewan, Alberta and Ontario.

“Of course I’m disappointed Ottawa didn’t see the wisdom of supporting a government which has been willing to expend the political capital of proposing to bring in a carbon tax when no other conservative government would,” he said.

Opposition reacts

NDP Opposition Leader Wab Kinew said Pallister’s plan could lead to a bureaucratic mess.

“The federal government is either going to reject this outright … or we’re going to have this weird double carbon tax in Manitoba where 25 (dollars) gets charged by the province and five gets charged by the federal government.”

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Liberal Leader Dougald Lamont said the move will add to the province’s deficit, because the proposed carbon tax will raise $40 million less than what the province will lose by cutting the sales tax.

“I don’t see this as being fiscally responsible.”

0:57 Brian Pallister talks about his carbon tax plan for Manitoba Brian Pallister talks about his carbon tax plan for Manitoba

Kelly Saunders, an associate professor of political science at Brandon University, said Pallister may be trying to find a middle ground with Ottawa before a ruling in Saskatchewan’s Supreme Court case.

Two of three lower court rulings have said the federal government has the authority to impose its tax.

“Many legal experts are saying that the Supreme Court will likely rule that the federal government does have a right to set tax in this area, so maybe (Pallister) is anticipating that and trying to pre-empt that,” Saunders suggested.

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The province announced earlier this week that the provincial deficit was smaller than budgeted.

“Manitoba is showing continued progress toward balancing the budget and steadily reducing the deficit,” said Minister Scott Fielding Tuesday, before crediting Manitoba’s steady economy for the extra revenue.

The third-quarter report for the 2019-2020 fiscal year shows the province’s projected deficit at the end of the year will be about $325 million, down from a previously estimated $360 million.

-With files from the Canadian Press

0:33 Manitoba to push ahead with carbon tax challenge in court Manitoba to push ahead with carbon tax challenge in court