Ontario will stem impact of tax harmonization by exempting some goods


Globe and Mail Update

March 25, 2009 at 6:56 PM EDT

TORONTO — The Ontario government plans to take the sting out of tax harmonization by dropping the new blended sales levy on a range of basic goods, including children's clothing, books, diapers and new houses costing less than $400,000.

Government sources said on Wednesday night that tomorrow's budget will include plans to harmonize the province's 8 per cent sales tax with the 5 per cent federal goods and services tax. To further help consumers adjust to the new regime, families with yearly incomes of less than $160,000 will receive one-time compensation of $1,000, consisting of three equal payments over 12 months, the sources said.

The list of items that will be exempt from a new harmonized tax was revealed as Premier Dalton McGuinty's government came under fire over the tax reform measure. Consumers feared that they would face higher costs for heating oil, diapers and children's clothing, all of which are currently exempt from Ontario sales tax.

Opposition members at the provincial legislature denounced the move following a story in The Globe and Mail that the government will sign a tentative accord with Ottawa to harmonize the PST with the GST — a step federal Finance Minister Jim Flaherty has been urging the province to take.

“People are losing their jobs left, right and centre,” said New Democrat Leader Andrea Horwath. “They're worried about how they're going to make ends meet. The last [thing] they want is a government that's ignoring their concerns and slapping another tax on them.”

Interim Progressive Conservative Leader Bob Runciman accused the Premier during Question Period of breaking his promise not to raise taxes.

“The addition of these taxes is leading you down the path of another broken promise,” he said.

Tax harmonization is a key plank in the McGuinty government's plan to help the province recover from the recession. Businesses have been pushing for harmonization because it will make them more competitive by reducing their costs. They could receive a refund for taxes paid on goods and services and other purchases to run their operations.

Mr. McGuinty reiterated earlier on Wednesday that he would take steps to protect consumers from the impact of higher taxes. He has also said that signing an accord with Ottawa is contingent on the Harper government providing compensation to the province.