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Helping the Ontario Economy
October 8, 2009
Over the last several years Ontario’s economy has fallen behind. No longer does Ontario lead Canada in economic performance. No longer is Ontario the wealthiest province. No longer is Ontario’s manufacturing sector vibrant, strong and growing.
Why is this? Obviously, a number of factors outside of our control, such as the global economic downturn, have played a role. But those factors are not the main reason. Ontario’s economic performance has declined in the last decade relative to other Canadian provinces. And the reason is simple. Ontario’s tax regime is killing manufacturing jobs and deterring investment. The Provincial Sales Tax (PST) is largely responsible for this problem. The best way to create jobs and rebuild our manufacturing sector is to replace the PST with a Harmonized Sales Tax (HST).
Since 2006, our federal government has encouraged Ontario to improve the competitiveness of our tax system by harmonizing the PST with the Goods and Services Tax (GST) into a single HST. It must be noted that the decision to harmonize the PST with the GST ultimately rests with the Province of Ontario.
Throughout Canada, Provincial Sales Taxes (PSTs) impose a significant tax burden on new manufacturing investment and increase the day-to-day operating costs of Canadian manufacturers. Unlike the HST or the GST, both of which provide manufacturers with a credit for the sales tax they pay on their inputs, PST costs are subsequently embedded in the prices manufacturers have to charge for their products, resulting in higher prices for many consumer goods. Ultimately, this makes our manufacturers less competitive, reduces employment and lowers the standard of living for Canadians. Modernizing the harmful PST by implementing the HST is the single most important step that Ontario can take to stimulate new manufacturing investment and create jobs. That’s why Ontario is implementing the HST. That’s why British Columbia is implementing the HST. That’s why New Brunswick, Nova Scotia and Newfoundland adopted the HST over 10 years ago. We need to revive our manufacturing sector, and the HST will do more to help manufacturing than any other measure.
Many people would be surprised to know this fact: The HST is the single most important thing we can do to revive our manufacturing sector. Why? Ontario’s current PST significantly increases the cost of purchasing new manufacturing equipment, equipment that keeps us competitive with America, Asian and European competitors. When Ontario implements the HST, the investment costs of new manufacturing plants, capital and equipment will drop by nearly 10 percent. This, in turn, will make Ontario a more attractive place to invest in manufacturing and help create manufacturing jobs.
The federal government remains committed to lowering the tax burden on Canadian citizens. That is why we have reduced the GST by 2 percent since 2006, and through Canada’s Economic Action Plan, we have introduced more than $20 billion in tax relief measures. These measures include increased child benefits, tax relief for low and middle income seniors, a home renovation tax credit, and a reduction in the federal income tax rate imposed on small business income. These measures are designed not only to reduce the tax burden borne by Canadians, but also to stimulate new economic growth.
Several people have asked me about rebates and exemptions to the proposed HST. The Province of Ontario is proposing several rebates and exemptions (such as basic groceries, prescriptions and music lessons). I have also heard from those of you concerned that the HST will increase in prices. A recent TD Bank study found the HST would add about half of one percent to average consumer goods and services. This is a small amount which TD Bank called, “an acceptable price to pay for greater efficiency and neutrality in Canadian taxation, and greater international competitiveness”. It’s also a small amount that will be offset by the benefit of new investment and new jobs in manufacturing.
While no significant tax reform is ever easy, it is necessary to keep up in a competitive global economy. The HST will help attract investments in manufacturing, creating manufacturing jobs and rebuild this vital sector of Ontario’s economy. That’s why I’m supporting the HST.
For your information, I have attached the link to the Ontario Chamber of Commerce where you will find a video that outlines the benefits of a single tax for Ontario. http://occ.on.ca/2009/08/ontarios-single-sales-tax-and-tax-reform-package-explained/
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