The Investment Funds Institute of Canada appeared before the Ontario Standing Committee on Finance and Economic Affairs on Thursday to express concerns over the proposed harmonized sales tax and its impact on mutual fund investors.

IFIC’s appearance was part of the committee’s review Bill 218, the Ontario Tax Plan for More Jobs and Growth Act, which includes the implementation of the controversial HST.

The mutual fund industry is expressing concern over the way mutual funds will be treated by the new tax.

“We are here today to express our concern that Ontarians saving for retirement and other purposes are seeing their mutual funds taxed at a four to five times the rate embedded in GICs and other financial products,” said Joanne De Laurentiis, president and CEO of IFIC. “Other countries have recognized the need to treat all financial products the same and we’d like the federal government to change the GST – and HST – accordingly.”

She said the mutual fund industry understands the government’s goal of harmonizing its retail sales tax with the GST. A single federal‐provincial harmonized sales tax, De Laurentiis acknowledged, would help make many Canadian businesses more competitive; free countless businesses from the costs of having to manage two separate tax systems; and eliminate Ontarians having to pay tax on top of tax.

But the mutual fund industry is pressing the federal government to modernize its GST policy to bring it in line with other VAT and GST regimes globally. De Laurentiis pointed to the popularity of mutual funds, and the role they play in helping Canadians save.

“Mutual funds provide Canadians with access to portfolio expertise and investments once available only to large institutional clients,” she said. “As interest rates dropped during the 1990s, Canadians turned to mutual funds seeking higher returns. Mutual funds allowed ordinary Canadians to save small amounts on a regular basis, affordably diversify risk and get the personalized advice that they need to help manage saving for education, a home, a small business and retirement.”

De Laurentiis said the mutual fund industry has had constructive discussions with Ontario Finance Minister Dwight Duncan and his officials over the last several months. She said she is pleased that Duncan has agreed to support the industry in its request of the federal government to fix the application of the GST and HST to mutual funds.