Sunday, September 27, 2009

Ontario can't drop new tax

Daddy Dalton's nose just poked out Dwight's eye, as it just grew 3 feet.

Sep 24, 2009 04:30 AM

Robert Benzie
Queen's Park Bureau Chief
Ontario's controversial harmonized sales tax is here to stay – no matter who wins the next federal or provincial elections, documents confirm.

Buried in the fine print of the accord signed last March between Ottawa and Queen's Park is a clause that ensures the new 13 per cent tax, which takes effect July 1, remains at that rate until at least 2012.

Premier Dalton McGuinty said yesterday he was not up on the minutiae of the four-page memorandum of agreement, which also stipulates the HST must be in place through 2015.

"I'm actually not familiar with that stuff," McGuinty said. "I'm sure that (Finance Minister Dwight Duncan) will be of help."

He said it was important for both levels of government to give the levy, which blends the 8 per cent provincial sales tax with the 5 per cent federal goods and services tax, a strong foundation.

"Our intention is simply to put in place a tax system that is modern and efficient and that enhances our competitiveness and enables us to create more jobs – that's what it's all about," the premier told reporters.

"In no jurisdiction that they have put this into place have they ever repealed it.

"There's a broad consensus among economists and, in their hearts of hearts, politicians as well, that this is the right thing to do," he said.

Duncan, who co-signed the pact with federal Finance Minister Jim Flaherty, said Ottawa insisted upon the provisions that entrench the business-friendly HST.

"That was something the federal government wanted. The Canada Revenue Agency will now collect the tax and it's enormously complex," said Duncan.

"We agreed to it. Ontario political parties, if they choose, ... can start changing it – either raising it or lowering it, frankly –in 2012," he said, noting that any modifications would have to wait until nine months after the October 2011 election.

In exchange, the federal government is giving Ontario $4.3 billion in transition funds, most of which will be passed along to lower- and middle-income families in the form of rebate cheques.

Duncan's comments came after federal Liberal Leader Michael Ignatieff finally admitted Monday he would not repeal the tax if his party defeats Prime Minister Stephen Harper's Tories.

Ignatieff's view of the tax has national implications since an almost-identical deal with British Columbia means that province will have a 12 per cent HST as of next July 1 in exchange for $1.6 billion in federal funding.

Designed to be business-friendly, the streamlined HST will raise the price of a slew of goods and services in Ontario that are not now subject to the provincial sales tax, including gasoline, fast-food value meals, tobacco and funerals.

Progressive Conservative Leader Tim Hudak expressed alarm at the emerging details in the Flaherty-Duncan accord.

"It certainly sounds like Dalton McGuinty is trying to lock Ontario taxpayers into a bad deal – a deal that will see some $2.5 billion sucked out of their pockets and into the government treasury," Hudak said.

With provincial Conservative sources suggesting the party might campaign in 2011 on cutting the tax to 12 per cent, the Tories' policy-making could be hamstrung by the agreement.

NDP Leader Andrea Horwath, who also opposes the tax but hadn't studied the accord, said it is further evidence "why we have to stop the tax from even going in."

"We have to become more vigorous in our opposition to the tax and we have to get the people of Ontario to join the campaign against it because ... we have to make sure the tax never sees the light of day in Ontario," said Horwath.

As opposition parties strive to derail the HST, proponents have formed the Smart Taxation Alliance to help sell it.

It is made up of tax boosters like the Ontario Chamber of Commerce, the Canadian Council of Chief Executives, the Canadian Manufacturers & Exporters Ontario, the Certified General Accountants of Ontario, the Ontario Road Builders' Association, the Ontario Trucking Association, the Retail Council of Canada, TD Bank, and the Toronto Board of Trade.

The group said the tax would slash red tape and save businesses $500 million a year in administrative costs alone.

It notes that getting rid of the separate PST and GST will remove $5 billion in "layers of embedded taxes" and increase competitiveness.

Toronto Star

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