Sales tax reform is one of the most effective ways to combat the economic challenges facing Ontario, according to a report prepared for the Ontario Chamber of Commerce.

The chamber say the report demonstrates that Ontario households, businesses and government will all benefit from reform of Ontario’s sales tax.

“Harmonization of Ontario’s sales tax with the GST will lead to a stronger economy with higher real wages, a higher standard of living, higher productivity, lower business costs, and increased investment. This is one of the most important policy directions we can put in place today to position us for a strong recovery at the end of our current economic difficulties,” explains Len Crispino, president & CEO of the Ontario Chamber of Commerce.

“Our research has disproven all of the common objections to sales tax reform, providing the opportunity for the province and the federal government to make a serious commitment to enter into negotiations in order to make it happen.”

The report points out that there is currently a willingness federally to work with provinces wishing to harmonize their sales taxes, and demonstrates that harmonization in Ontario will give the federal government the fiscal room to provide compensation to offset any short term loss in provincial revenues.

The report illustrates three potential options for the harmonization of Ontario’s sales tax with the GST:

> a simple harmonization which replaces the PST with an 8% tax harmonized with GST;

> alternative A which exempts the purchases of children’s clothing, “clean” energy, labour intensive services and the MASH sector (Municipal, Academic, Schools, Hospitals) from the Ontario portion, and;

> alternative B which zero-rates financial services from the Ontario portion

All three options build in an Ontario sales tax credit for low income Ontarians, the chamber says.

“Our manufacturing sector and others that rely on external markets, as well as the domestic industries that supply them, are in need of a lower cost of doing business so that they may be more competitive in the long term,” adds Crispino. “It’s clear there’s little room for tax cuts right now so other options must be investigated. Smart tax policy just makes sense.”

IE