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Ontario May Harmonize Sales Tax With GST

Saturday, January 24, 2009

Ontario May Harmonize Sales Tax With GST

...It's about time....

I

read in the Toronto Star Ontario Premier Dalton McGuinty and his government may harmonize the Ontario sales tax with the federal GST. To that I say, it's about time.

Currently the three N provinces (Nfld., NB & NS) have a harmonized sales tax with the federal government. Quebec has something similar, but Ontario has maintained its antiquated Retail Sales Tax and it's all about politics and getting votes.

Sales taxes are visible and annoying to voters and changing them usually means trouble. The Ontario government needs the revenue from a sales tax and the best solution is a consumption tax on most goods ands services and not just on goods.

A harmonized tax will significantly reduce administration and compliance costs for businesses. One tax return to complete instead of two. One set of laws to follow instead of two.

It will also result in a fairer tax in that people who consume more, pay more.

It will also result in a slightly more competitive business economy. Under the current RST, businesses pay RST unless there is an exemption (e.g., buying a good for resale to a customer), but many times the RST is paid and becomes a cost of the business. It reduces their profits or is passed on to customers with higher prices. With a HST, businesses would recover these costs as an input tax credit. They can earn more profits or reduce their prices or both.

Let's hope the Ontario government has some sense and acts on this issue.

Posted 2009/01/24 at 13h37ET in Tax Law.

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