Thursday, March 26, 2009

McGuinty: When cough medicine simply isn't drowsy enough, screw Ontario even more

So it's true except for the official announcement: Ontario will enter into negotiations with Ottawa to harmonize the two sales taxes, and it will kick in July 1, 2010.

From a business standpoint, a harmonized tax is mostly good news. First it should clear up a lot of bureaucracy since the provincial tax they pay for supplies can be deducted from the amount they collect from consumers, essentially making it tax free for the operators; second exports will immediately become less expensive (by 7.4% since they would be going back to a base of 100 and not 108) and third only one tax remittance has to be filed, not two. This last item is something harmonized jurisdiction businesses actually like, sending only one form or e-file every two weeks or four to Ottawa (in the case of New Brunswick, Nova Scotia and Newfoundland-Labrador) or Québec City (in the case of Québec).

From a consumer standpoint, especially for lower income people, this will be a big setback even with rebate cheques of $1000 per year (which if true should really be combined with the GST cheques we're getting instead of being sent separately). And you know it's going to get the triskadekaphobics out in full force. 13% on everything? 13 -- no I don't believe the superstition but many people do.

The time to have done this was during the time the GST was actually introduced back in 1991. It would have given businesses the chance to convert to a harmonized system right then and there. We all remember the fury over conversion costs then, now they're going to have to go through the process again. And besides which, does anyone really believe that a cut in internal costs will be passed on to consumers, especially in times like these? Did Canadians get cost savings when the hidden 13.5% federal sales tax was replaced by the 7% (now 5%) GST? Inflation more than doubled to 6%, then when it settled down all too quickly, we actually went into deflation (-1%) for a year. A spiral like that now is the last thing Ontario needs.

The best part is reports this morning suggest that the province will actually wind up with less revenue overall, not more, as the result of this. All this will do is increase the fortunes of the provincial NDP. But rest assured: A tax implemented is a tax that is almost never eliminated. (The temporary "war" income tax, which has been in place since 1917, for instance -- which started as a wealth tax but quickly spread to nearly the entire population.) Not even the NDP will dare tamper with such a cash cow.

And as Alberta's oil royalties begin to become more unstable look to it to follow Ontario's example and finally impose a sales tax of its own -- also harmonized with the GST.

The pill would be a lot easier to swallow if there are some goodies in today's provincial budget -- a move to universal day care, or more money for seniors besides the paltry $250 property tax rebate and the $83 per month poor seniors get as a top up on their Old Age Security cheques. Heck, I'd be happy with a universal drug plan like Québec has.

But I'm not betting on any of those. Unless this is a budget for the people, McGuinty has lost my vote come the next election -- it will either be NDP or Green depending on my mood.

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FredM said...

McGuinty has done nothing but cost the people of Ontario money, and the people of Ontario have done nothing but give him a free pas for it. I remember when Harper came out with his first budget people did nothing but whine because the tax cuts weren't big enough. McGuinty does nothing but raise prices and all we here is crickets chirping. Lets face it if Harper lied to Canadians the same way McGuinty has lied we would be in a coalition federal gov't, I know im comparing federal to provincial but the media bias is the same. Nice fair article by yourself.

sassy said...

At the risk of embarrassing myself, I know I'm missing something here but can't see what it is.

Currently I pay 5% GST and 7% PST on an item. Using a $100 purchase as an example, that would be mean a total (GST=$5 and PST=$7) of $12 on that $100 item.

As I understand it, with a 13% tax, with would result in $13 tax on a $100 item. If this am correct, why not just raise the PST by 1% making it 8% instead of the current 7%? (8+5=13)

What am I missing here? Will items that are not currently PST taxed now become taxable or something like that?

Even after reading this from the NP and the Wikipedia explanition on harmonized sales tax, I am still not clear.

BlastFurnace said...

Fred: Thanks for the compliment. It's worth remembering that when Harper first came in, he paid for the GST cut by raising the bottom rate of the income tax. This was clearly stated in their platform but he conveniently left it out of the stump speeches that the press covers. He later cut it back to where it was, but by that time they were already spending like drunken sailors so it was counterproductive.

Sassy: The provincial sales tax in Ontario is 8 (eight) percent, not seven. So it will be thirteen percent on everything. It's worth noting that the provinces that have harmonized still have the flexibility to adjust their portion whenever they want. Just look at Québec -- which has just raised its sales tax by one percent to make up for the two percent cut in the GST (since in la belle province it's actually a tax on tax, not just a self-standing sales tax!)

Anonymous said...

I really dislike McGuinty, all he does is waste our time and money, and I am so sick of it!

Anonymous said...

Sassy, i think what you're missing is that the Ontario PST is 8%, not 7%. 8%+5%=13%.

BlastFurnace said...

Just heard the budget announcement. A cut in the lowest income tax rate, some tweaks in the surtax and corporate tax cuts -- but it won't be enough to get rid of the sting of the HST. Also, the $1000 rebate is a one time thing paid out over three installments, not $1000 per year, which sucks even more.

Michelle: I've gotten sick of him too. He was bland, but in a nice way. Now he's a total narcissist. Plus he represents an Ottawa district -- what do you expect from living among bureaucrats?

RC: Thanks for backing me up on this one. Frankly, the pill would have been easier to swallow if the provincial sales tax had been cut to around 5%, making the total 10 (5+5) but of course that was too much to hope for.

sassy said...

Thanks BF and RC for correcting me on the PST rate.

FredM said...

"RC: Thanks for backing me up on this one. Frankly, the pill would have been easier to swallow if the provincial sales tax had been cut to around 5%, making the total 10 (5+5) but of course that was too much to hope for."

That would be nice idea also. Except for the liberal brand name, I have no idea what people see in this guy, his party(as in the people in his party), or his policies.