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FREDERICTON - A committee studying proposed changes to the provincial tax code will soon recommend the Liberals implement a flat income tax rate, boost the HST and slash the province's corporate tax rate - all while giving the boot to the notion of a carbon tax.

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Ben Shingler/Telegraph-Journal

Auguste Gallant, spokesman for the New Brunswick Fair Tax Coalition, speaks to the media Thursday in Fredericton during a protest of the Liberal government's proposed tax reforms.

The bi-party committee examining the taxation issue largely concluded its business Thursday. A draft of the committee's final report was leaked to the Telegraph-Journal and a member of the group later confirmed minor changes that were made during Thursday's final editing session.

The end document, which will soon be presented to Finance Minister Victor Boudreau and tabled in the legislature, will recommend the government execute a flat income tax rate of 10 per cent.

Such a move, states the report, would simplify the tax system and give New Brunswick the lowest overall personal income tax rate in Canada.

The committee, which held public consultations on the Liberal tax proposals this summer, says the flat tax was heartily endorsed.

The document also calls on the Liberals to chop the general corporate income tax rate to five per cent from 13 per cent, which would make it equal to the current small-business tax rate.

Ottawa has challenged the provinces to lower their corporate tax rates to 10 per cent, to match Alberta - home of the country's lowest provincial corporate tax rate.

But the committee argues New Brunswick should push further to improve the local climate for business and capital investment.

And then there's the idea of a carbon tax.

When the Liberals unveiled their potential reforms back in June, the plan was immediately blasted for its mention of such a measure. Not surprisingly, the committee calls for government to ignore the tax, which would be levied on carbon fuels and emissions.

According to the committee, a carbon tax would put the province at a competitive disadvantage because of its heavy reliance on fossil fuels for electrical generation. The report notes that 58 per cent of electricity in the province comes from sources that would be subject to the tax.

A carbon tax, it concludes, requires more study.

But the lack of a carbon tax creates a problem: how to fund the personal and corporate tax cuts.

The original Liberal plan claimed the cuts - up to $500 million a year - would be funded through the carbon tax and a boost to the Harmonized Sales Tax (HST).

The HST, it was proposed, could be put back to 15 per cent - an increase of two percentage points.

However, while the tax committee recommends a boost to the HST, it doesn't specify by how much. The report just says government should increase it to offset the corporate and personal tax cuts - meaning it could go above 15 per cent.

"The options for restructuring our tax system are very limited without another source of revenue," concludes the report of life without a carbon tax.

Still, the paper argues there must be HST protection for low-income earners and seniors, who spend a higher percentage of their earnings on taxable goods.

So the committee recommends a rebate program, similar to federal GST rebate, to lessen the impact on low-income earners.

Property taxes were also a major concern during the committee's summer hearings. The report describes the current setup as "regressive and inequitably imposed."

It also chides the "unexpected and escalating assessments" that New Brunswickers face.

So, Boudreau will be told to reduce the non-residential property tax rate from $2.25 to $1.50 per every $100 of assessed property value.

And, the committee says, the Liberals should reduce the $1.50 tax (per $100 assessed property value) on residential properties not occupied by the owner, such as apartment buildings.

As well, says the report, the Grits should extend the $0.65 tax rate to all types of properties in local service districts and impose a three-year average assessment value on property.

Committee head Roly MacIntyre concludes that the tax changes should be made gradually over five years.

On Thursday the Saint John East MLA told reporters it will require "major guts" to actually implement the measures.

Opposition critic Bruce Fitch says the plan is all wrong.

The Riverview MLA said raising the HST will be harmful to low-income earners who already pay less than 10 per cent income tax.

Fitch also opposes the deep corporate tax cut - as long as the small-business tax remains unchanged at five per cent.

The committee report also calls on the Shawn Graham government to launch a non-refundable child tax credit to reduce personal income tax by up to $400 per child.

As well, the plan calls for a Universal Child Care Benefit that would annually pay parents $600 per child under the age of six.