Ontario to forge ahead with sales tax reform


From Wednesday's Globe and Mail

March 24, 2009 at 9:22 PM EDT

TORONTO — The Ontario government will announce in tomorrow's budget that it will sign a tentative accord with Ottawa to harmonize the province's 8 per cent provincial sales tax with the 5 per cent federal goods and services tax, sources familiar with the document said.

The accord, a first step in what is expected to be a lengthy process to reform the province's sales tax, was welcomed by business, but could anger consumers, who would end up paying a single, blended consumption tax of 13 per cent.

Consumers fear that taxes would increase on basic goods such as heating oil, diapers and children's clothing, all of which are currently exempt from Ontario sales tax. Under harmonization, a new value-added tax would apply to all products covered by the goods and services tax, and consumers would see one charge on a sales receipt.

A harmonized system would add $46,676 to the purchase of a new home in Toronto, according to one study.

But the biggest political risk for the government is at the bottom of the economic spectrum: poor families and those joining the swelling ranks of the unemployed who can least afford to pay an extra 80 cents in tax on a $9.99 pair of baby shoes.

The proposed tax changes are part of an extraordinary move by Premier Dalton McGuinty to address the province's stunning reversal of fortune. Ontario officially became a poor cousin of Confederation this year, receiving payments under the national equalization program for the first time, and it is not at all clear whether Canada's most populous province will ever reclaim its status as the country's economic powerhouse.

Harmonization would help the ailing province weather the recession by making businesses more competitive, because they could receive a refund for taxes paid on goods and services and other purchases to run their operations. Mr. McGuinty would not confirm Tuesday that the reform is part of the budget, but he acknowledged the risks.

“I don't think we've been put in government to choose what's easy,” he told reporters.

He said in January that he was considering harmonizing the two taxes. Tuesday, however, he said the initiative could die unless the Harper government agrees to drop the GST from household goods that are not charged provincial sales taxes. Federal Finance Minister Jim Flaherty has been urging Mr. McGuinty to harmonize the two taxes for more than a year. The Premier noted that when three of the Atlantic provinces harmonized their sales taxes with the GST back in 1997, at the urging of former finance minister Paul Martin, they received compensation from the federal government because their tax revenues declined.

“It's not the kind of thing you would want to pursue unless at the same time you were going to find a way to protect families,” Mr. McGuinty said.

The backlash has already begun. The Building Industry and Land Development Association released a study earlier this month showing that harmonization would cost home buyers $2.4-billion more a year. Tax increases on new home sales would range from $12,000 to more than $46,000. “I fear the worst,” Stephen Dupuis, president of the association, said in an interview Tuesday. “We're the most expensive thing people buy, so the impact is just huge.”

Opposition members also weighed in on harmonization Tuesday, revealing that the government will face opposition from both sides of the political spectrum.

“On the surface, we're very, very nervous about bringing in harmonization at the very time when this province is really being faced with challenging times,” said Bob Runciman, interim leader of the Progressive Conservatives.

New Democrat Leader Andrea Horwath criticized harmonization as a “regressive” scheme. “This is nothing but a sales-tax grab that will nickel-and-dime families that are already feeling the squeeze,” she said.

Finn Poschmann, vice-president of research at the C.D. Howe Institute, said the government could introduce measures for consumers, including rebates for low-income families, to compensate them for paying taxes on products now exempt from provincial tax.




Ottawa Mens Centre.com, from Ottawa - Home of Corrupt Judge Allan Sheffield, Canada) wrote: An Outrageous Abuse of Political Power, Trust a lawyer Premier to pull this kind of fast one that disadvantages the poor with an opportunistic predatory like behaviour by politicians who have scan regard for the realities of those living on merge incomes.
The liberals are showing a conceited extremely arrogant level of confidence that is disturbing in the extreme.