The battle over the Manitoba government's hotly contested PST increase was waged in court on Wednesday, as the provincial Progressive Conservatives challenge the tax hike before the Court of Queen's Bench.

The PCs allege that the NDP government broke the law because it didn't hold a referendum on the tax increase, which had been required under the province's balanced budget legislation, but instead suspended that requirement at the same time as it introduced the increase.

But Finance Minister Jennifer Howard called the Tories' lawsuit a political stunt and said the courts cannot decide what the legislative assembly can and cannot talk about.

"We had a process to deal with this bill. It was in front of this house for eight months, hundreds of Manitobans came to speak to it, Manitobans today will still debate it. I expect that debate will continue on towards the next election, and that's the right way to deal with a political issue," she told reporters on Wednesday afternoon.

"To try to involve the courts in what is a partisan discussion, I think that is a stunt, I think that is a political tactic. But we're going to continue to make those investments in critical infrastructure and growing the economy.

No justification for decision, says lawyer

During the hearing, Robert Tapper, the lawyer representing the Tories, told the court the government has not justified its decision to sidestep the referendum.

"Like the schoolyard bully taking his football home, it says simply, 'We do this because we can' — not because there was some good idea behind it, not because it made sense in some manner," Tapper told Justice Kenneth Hanssen.

"They decided … to remove the rights of Manitobans to a referendum simply because they could, or so they say. The point of our position, of course, is that constitutionally, they could not."

The New Democrats had to suspend a section of the balanced budget law that required a referendum on any increase to provincial sales, income or payroll taxes.

The NDP could have introduced a bill separately to sidestep that referendum rather than attach it to a budget bill, which required all government members of the legislature to vote in favour or risk toppling the government, Tapper said.

"Why do it in one bill?" Tapper asked. "Was it arrogance?"

He suggested the government disregarded Manitobans when it overruled it own law.

NDP says it had right to raise tax

The NDP has said the government had the right to raise the sales tax and sidestep a referendum.

Jonathan Kroft, the lawyer representing the government, told court that the Progressive Conservatives' arguments are not supported by either the constitution or the Charter of Rights and Freedoms.

Jennifer Howard - June 4, 2014

Manitoba Finance Minister Jennifer Howard told reporters after Wednesday's court hearing that the Tories' PST lawsuit is a political stunt. (CBC)

"The Supreme Court of Canada is very sensible as well as being completely authoritative on this point: there's no constitutional right to a referendum," he said.

Kroft also argued the provincial government has a right to manage the economy and change laws freely.

"We can't bind them and we can't tie their hands," Kroft told the judge.

"The court is being invited to tell the legislature what it could and couldn't talk about. That's a matter covered by parliamentary privilege. This court should not be going anywhere near that question."

The government has said it had to raise the sales tax to make important investments in infrastructure.

PST went up last year

The PST rose to eight per cent in July 2013, up from seven per cent.

In April, Progressive Conservative Leader Brian Pallister said his party filed the lawsuit to stand up for taxpayers. He pledges to reverse the hike if his party wins the next provincial election.

"Manitobans aren't benefited by a government that hikes taxes, and they sure aren't benefited by a government that breaks its word. But they also deserve to be respected and given the chance to vote on major tax hike proposals such as this one," Pallister told reporters before the court hearing started.

The NDP has said it followed proper guidelines and legal advice in getting the tax hike approved.

Howard and other government officials have maintained that the revenue generated from the tax increase will pay for critical infrastructure projects, including flood protection structures.

"The decision that we made to raise the PST by one point — one cent on the dollar — was about investing in good jobs, investing in growing the economy, protecting people from floods, and infrastructure, without having to make the kinds of cuts to services that Manitobans count on like health care and education," Howard said.

"What the Conservatives are doing today is to try to force us to make the same wrong decisions that they made in the '90s, trying to force us into a situation where the only way to invest in good jobs is to cut services," she added.

"We said no to that approach. We think we have a more responsible approach."

With files from The Canadian Press