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Selling The HST And Tax Reforms

Tax will create jobs, save business money: Revenue Minister Wilkinson.
The province’s proposed harmonized sales tax (HST) will help Ontario businesses become more competitive in a global economy. But it’s just one part of a comprehensive tax reform that will also reduce the small business corporate income tax rate and eliminate the small business deduction surtax. That’s the message Ontario Minister of Revenue John Wilkinson brought to a packed breakfast meeting hosted by the Greater Oshawa Chamber of Commerce in partnership with the Durham Region Home Builders Association and Durham Region Association of Realtors.

“One of our most important goals is to help Ontario businesses become even more competitive, so you can produce more, export more and – most importantly – create more jobs,” Wilkinson said at the breakfast, held October 14 at the Holiday Inn Oshawa Whitby Conference Centre.

Wilkinson, the first Certified Financial Planner elected in the province, has been travelling throughout Ontario to sing the praises of the controversial – and by his accounts, misunderstood – HST. Foes say the Liberals’ tax reform comes down to nothing more than increased sales tax for many items, but that’s just not so, the Minister argued.

The time to revamp the tax system is long overdue and there’s no better time than now because the economy will be “fundamentally different” after the recession – forcing Ontario businesses to compete more aggressively. “We are the only jurisdiction in the world that exports 80 per cent of what we make yet still taxes the inputs needed to make these goods and services in the first place,” Wilkinson noted.

More than 130 countries have adopted the value added tax. “We’re still listening to music on an 8-track when the rest of the world has an iPod,” Wilkinson said. “We can’t attract investment and jobs in the 21st century with a tax system from the 1960s.”

In Nova Scotia, New Brunswick, and Newfoundland and Labrador, per capita investment rose by more than 11 per cent in the year following implementation of a harmonized sales tax compared to other provinces and investment in machinery and equipment increased by over 12 per cent a year, the Minister reported.

Wilkinson criticized the PST and “layers of hidden taxes” that boost the cost of an item. Companies which have been paying the PST will now get to keep the savings and if they want to remain competitive, will pass along their savings to customers, he said.

Further, the HST will be cheaper to administer than current regulations and paperwork. On that note, Wilkinson addressed concerns about the fate of provincial Ministry of Revenue employees who work in Oshawa, Pickering and Ajax. Several federal government departments and agencies are interested in their skills, including the Canada Revenue Agency and Canada Border Security Agency, he reported.

The Liberals promise to permanently cut the small business corporate income tax rate from 5.5 to 4.5% next year, to eliminate the small business deduction surtax and capital tax, and to drop the general corporate income tax rate from 14 to 10 per cent by 2013.

But it will take time for savings to filter down to consumers. “The first year will be difficult,” Wilkinson conceded. “We don’t want a consumer-led recession because of sticker shock, so there will be a lot of fiscal stimulus in the first year.”

The federal government will transfer $4.3 billion to the McGuinty government, which will in turn give families with less than $160,000 of net income a year three tax-free payments totaling $1,000. Single people with less than $80,000 net income a year would receive three tax-free payments totaling $300.

Next year, the government will permanently reduce the personal income tax rate from 6.05 to 5.05 per cent on the first $36,848 of taxable income. The new Ontario Sales Tax Credit will provide up to $260 a year for each adult and child in low and middle-income families.

The HST will blend the 5% GST and 8% PST when it is implemented on July 1, 2010.