Single sales tax makes sense
Quebec businesses could save billions
By JIM FLAHERTY, Freelance
April 15, 2009
The harmonization of sales taxes - the GST and QST - is not the most exciting issue or the easiest to understand, but it's an important one for both our economy and jobs.
Recently, the Quebec government acknowledged that the provincial sales tax is not fully harmonized with the GST - and that it might want to adopt the same harmonization model that Ontario has just agreed to. Quebec's decision to consider adopting this harmonization model is a positive sign for a simpler and better tax system.
Why has Ontario - as Nova Scotia, Newfoundland and Labrador, and New Brunswick have already - decided to move to the harmonized model? They harmonized because it is good for businesses, reducing their tax burden. Ontario's decision to harmonize will result in approximately $5 billion less in taxes paid annually by businesses - a stimulus to the economy at a time when it is necessary. This will contribute to making businesses more competitive, allowing them to boost investments and create jobs.
The Quebec government had already recognized in principle that this is the smart thing to do when it chose to adopt a similar, but different, value-added tax model in the 1990s. Premier Jean Charest's government has indicated that it might be prepared to take the next step and adopt the full harmonized model. The federal government is ready to work with Quebec to make that happen.
For Quebecers and Quebec businesses, adopting the same agreement as Ontario would mean the harmonized tax would be legislated and administered federally. The federal legislation would spell out the items and services on which the tax is paid, and the exemptions as well. This is a uniform set of rules that would apply across the country, as it currently applies in other harmonized jurisdictions. It is a fair and consistent approach to all provinces.
Under this uniform set of rules, the tax base would essentially mirror the GST base, with the provincial portion of the tax not applying to the GST amount.
Businesses collecting the harmonized tax would deal with only one tax administration with no unnecessary layers of bureaucracy. This would lower costs for governments and taxpayers.
This is the consistent and fair model that exists in harmonized provinces, which the Charest government can choose to join. It is the model that Ontario chose in its recent budget, and under which other provinces have successfully operated for many years.
A single harmonized model for businesses in Quebec and in other provinces would be good for the Canadian economy as a whole - more investment, more growth, and more jobs.
Jim Flaherty is Canada's finance minister.
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Wednesday, April 15, 2009
Posted by Fillibluster at 5:22 PM