Taxpayers in Ontario have good reason to be concerned with the prospect of another 8 per cent being added to the costs of many services with the new Blended Sales Tax (BST).  While harmonizing the provincial sales tax may have many advantages in theory, now is the wrong time for Premier McGuinty to impose the new BST. However, if the Premier insists on plowing ahead, he should move to protect taxpayers by reducing the rate to 10 per cent.

Premier McGuinty says you should just take his word that the BST will be good for Ontario. Yes, his record of truth-telling when it comes to taxes is less than stellar. He has falsely promised not once but twice, without ambiguity, that he would not raise taxes. Ontarions know how that has turned out.

After his first ‘no new taxes’ election campaign promise in 2003, Premier McGuinty proceeded to hike business taxes and impose a new so-called ‘health tax’ - the single largest tax hike in Ontario history. As well, he gave new taxing powers to the City of Toronto which quickly imposed a new land transfer tax, a new vehicle registration tax, a new garbage tax and a new plastic bag tax. 

Since his second election campaign, which also featured another ‘no new taxes’ promise, Premier McGuinty has put in place a new paint tax, a new electronics tax and a new tire tax.  As well, his Green Energy Act includes a new energy tax and a home-sale-audit fee.  And there’s more, in the last budget he raised taxes for the top two tax brackets by lowering the threshold on which they apply, amounting to a large tax grab from the middle class. To top it off, July 1^st, 2010, the new BST will take effect, combining the GST of 5 per cent with the Provincial Sales Tax (PST) of 8 per cent and raising sales taxes on hundreds of everyday purchases.

Blending the sales taxes will provide a few benefits to large businesses, especially manufacturers. There will be reduced compliance costs and reduced net taxes on business inputs. The problem is that these benefits are offset by massive impacts on consumers for every service they buy.

If the Premier won’t abandon this ill-timed tax plan, he should at least undertake it in a manner that is less harmful. A key driver of tax reform should be ‘do no harm to anyone.’ Taxes should be made lower, simpler and flatter; but not by benefitting some at the expense of others. Sadly, the new BST provides benefits to business at the expense of individuals and families.

To reduce the pain of the BST McGuinty plans a bribe of McGuinty bucks - one-time cheques that, likely, won’t even cover the tax hikes. These bribes appear politically motivated, with cheques set to land in mailboxes just prior to the next election.

A better way to offset the pain of the BST would be to reduce the PST from 8 per cent to 5 per cent, for a combined rate of 10 per cent.  Atlantic provinces reduced the combined sales tax rate when they underwent similar changes. Alternatively, Premier McGuinty should raise the basic personal tax exemption high enough to offset the cost increases that consumers will be forced to bear.  This way the new BSTax would be cost neutral for most people.

Consumers in Ontario are understandably frightened at the prospect of another 8 per cent added to the costs of many services in Ontario. They have reason not to trust the Premier’s empty reassurances that all will be fine. He needs to announce real measures to reduce the financial pain the new BST will bring. The 10 cent solution would provide real action, not just words, to soften the blow of the new tax.

By: Kevin Gaudet
Posted: October 29, 2009
Topic: Ontario

Contact the regional director Kevin Gaudet for further information.

Type: Commentary

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