Ontario’s Minister of Revenue believes that the “Great Recession” has left the province in need of a “Great Recovery,” which will include dramatic tax reform and the implementation of a Harmonized Sales Tax (HST), which comes into effect on July 1.
Minister John Wilkinson (Perth-Wellington) called the 2010 changes the province’s most comprehensive tax reform in over 40 years.
The impact of the HST will be a unified 13 per cent sales tax on goods and services instead of a combined five per cent GST and eight per cent PST.
“Many things are already taxed at 13, but there are two governments tripping over each other. The HST will give no change on 83 per cent of the things your readers buy day-in, day-out,” Mr. Wilkinson said during a conference call with community newspapers from across Ontario.
Under Ontario’s current system, many items receive ‘point of sale’ PST exemptions. Under the HST, many of these exemptions, on products including children’s clothes and shoes, diapers, feminine hygiene products, books, newspapers, and prepared meals under $4, would remain.
“There are a number of things today that are subject to GST and PST where, at the cash register, we provide a point of sale exemption on the eight per cent, and the vast majority of those are being maintained,” Mr. Wilkinson said.
Things that are not exempt from the HST, and will go up in price as of July 1, include energy, gasoline, and heating fuels, as well as personal services such as hairstyling, and professional services such as legal and accounting.
Mr. Wilkinson explained which Ontario residents would benefit most from the reforms, and which would take the biggest hit,
“We’ve had a number of economists who are independent of the government take a look at this and the conclusion they’ve drawn is that the people with the least disposable income — so people on social assistance or seniors on a fixed incomes, or middle class families with a lot of children — they’re actually going to be in a better position; that the tax relief they’re receiving is greater than any additional cost that they would have on the 17 per cent of purchases that they make day-in, and day-out where they have to pay a higher sales tax. Poverty activists have said, and economists have confirmed it subsequently, that our tax reform is very progressive and we’re ensuring that the people with the least are not hurt by our tax reform. That was very important for us as a government that we brought in reform that was fair,” he said.
“For the middle class, it’s a wash. The tax that’s cut is the same as any sales tax increase. They pay one per cent less on the first $37,000 worth of income under our tax cuts, but they pay a bit more sales tax on less than one in five of their purchases,” he continued, “For the people who make the most money, they generally consume the most, so they will end up paying more, but according to the economists, not a lot more. Because they will benefit from the reduction in prices more than other people.”
To business owners who, for the first time, will have to charge a greater sales tax, Mr. Wilkinson said the benefits of the tax reform would help actually bring down their business costs.
Under the current system, designed in 1961, PST is buried or hidden on exports and consumer products made in the province, meaning they are taxed and re-taxed at multiple stages of production.
 “It is a disadvantage to our business community. The HST will eliminate this and reduce costs by $4.5 billion,” Mr. Wilkinson said, noting how, following the introduction of HST in Newfoundland and Labrador, New Brunswick and Nova Scotia, before-tax prices went down.
“The biggest advantage they had according to the economists is a 12 per cent increase, over and above the national average, in the purchase of machinery. It allowed those companies to actually invest in their company so they could create a greater market share,” he said.
Ultimately, Mr. Wilkinson believes the impact of the reforms will lead to three main results.
 “We’ll be more competitive as a province, which will lead to more investment, and then more jobs,” he said.
When Ontarians first heard about the proposed HST they also heard a lot of information from opponents of the tax that has not proven to be correct, he said.
“What we’re trying to do, of course, is to get people back to work. We have to make our economy more competitive so we have more people working. I’ve said many times that our tax reform isn’t about people paying more taxes, it’s about more people paying taxes because they’re working and have a job,” he said.
By implementing an HST, Ontario will be putting a tax system in place that is already in use by 140 countries around the world, as well as the Atlantic Provinces.
“This is a tax system that the rest of the world is used to. There’s only one country in the world that is still going to be reliant on retail sales taxes, and that’s the United States,” Mr. Wilkinson said, “The rest of the world — Europe and Asia — have already gone to the tax system that we’ll have in Ontario effective July 1. We want to make sure our businesses have what it takes to compete against the 140 other countries and our sister provinces that have already modernized their tax systems. When we decided to introduce the HST, British Columbia decided to follow suit because they said they didn’t want to be left behind.”
In order to make the new tax system more accessible to Ontarians, the government has designed and begun to advertise a new Web site (www.ontario.ca/taxchange), which carries information about how tax reform, HST, and income tax cuts will affect families, individuals, and businesses.
“We created that Web site as a resource for the people of Ontario,” Mr. Wilkinson said. “Over 400,000 have already gone to that Web site to get information. People have a desire to see what the impacts will be.”