Ontario look into harmonizing GST and PST

Ontario weighs tax blending

McGuinty says province will look into harmonizing GST and PST, as business groups push for action
Feb 08, 2009 04:30 AM

Robert Benzie
QUEEN'S PARK BUREAU CHIEF

NIAGARA FALLS – Ontario will aggressively explore harmonizing the provincial sales tax with the federal GST to help businesses battle the recession, Premier Dalton McGuinty says.
Speaking to 250 Liberals at the party's provincial council meeting here, McGuinty vowed to make his administration more business-friendly by slashing red tape.

"We in government need to help by making investments in workers, technologies and research more affordable," the premier said.
Later, McGuinty told a news conference "there seems to be an emerging consensus around harmonization. I'm not committing to doing it, but I just think we owe it to ourselves to take a good, long hard look at that."

Business groups and the federal government have pushed Ontario for action on the harmonization front for years.
"The Ontario Chamber of Commerce has put forward a position that says you absolutely must harmonize the GST and the PST," McGuinty said. "That's a tough thing to do politically, and we take a revenue hit. All previous governments have shied away from that. We need to give that a very serious look, for example."

In a 102-page report tabled last month, the chamber of commerce implored Queen's Park and Ottawa to blend the 8 per cent PST and the 5 per cent federal goods and services tax as soon as possible.

Quebec, New Brunswick, Nova Scotia and Newfoundland have done so, and federal Finance Minister Jim Flaherty has urged Ontario to follow suit.
Such a change would see Ontario businesses become more productive and save about $100 million annually, and it would cut down on paperwork, but the costs of many goods would rise. That's because some items are currently taxed federally and not provincially – including books, children's clothing, feminine hygiene products and heating fuels.

The province also believes harmonizing the taxes will cost it money because the PST would be removed from manufacturers' purchases of machinery, equipment and other things not subject to GST. Officials say this cost to the provincial treasury is more than would be recouped by the PST being added to GST-taxed items.

McGuinty said Ontario could not harmonize its tax with the GST without a large infusion of money from Ottawa.
"Consumers will be affected by this and our treasury takes a hit in the billions. In the past, when provinces have decided to move forward on that they ... have struck a deal with the feds," he said.

Although the premier suggested the taxes couldn't be blended in the province's March budget, he said it is not a pie-in-the-sky scheme.
"It's something that we're going to take a close look at, but I'm sure that as we pursue this conversation with businesses there will be some other things they might want to talk about as well," said McGuinty.
"Those are the kinds of things that we might begin to address" in the budget. "But it will take more than just one budget and one initiative to enhance the competitiveness of our businesses."

McGuinty said any harmonization agreement was not a "quid pro quo" with Ottawa, which has responded to Ontario's demands for an auto bailout, a regional development office for southern Ontario and enriched health transfers.
"It's something that's been bubbling in the background for a long time and other parts of the country have already adopted harmonization when it comes to PST and GST. One thing that I can say for sure is we can't do this without federal support," he said.

Progressive Conservative MPP Tim Hudak (Niagara West-Glanbrook) told reporters it was "time for Dalton to get off the proverbial pot on this issue."
"There's no doubt that the provincial sales tax punishes business investment," said Hudak. "We need to ensure, however, that this is not going to put another weight on the backs of consumers already struggling with high taxes and high energy costs under Dalton McGuinty."

Coutesy: Globe and mail

Asher Ullah
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Re/Max Active Realty Inc Brokerage
www.homesforgta.com