Ontario to forge ahead with sales tax reform
— 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
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.
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
The liberals are showing a conceited extremely arrogant level of confidence that
is disturbing in the extreme.