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Wednesday, April 22, 2009

Keep the baby; toss out the bath water

This post is an open plea to the eventual winner of the PC Ontario leadership race to not reverse the effort to merge the provincial sales tax with the value added GST. That, in my opinion, would be like throwing out the baby with the bath water. We should not be opposing the new taxation system, but rather we should be trying to have it modified to provide a much more reasonable burden on Ontario families.

Improving the investment climate, increasing the competitiveness of the business development environment, and reducing tax compliance costs for business with little or no effect on consumer prices overall sounds like an excellent economic deal, even if it’s not all that sexy.

 

GST harmonization: Not sexy, but smart — Fraser Institute

If we are to have a consumption tax at all, then the GST-styled system is a more efficient and less anti-business investment method of levying the tax. (For benefits, see this article available from the Fraser Institute.)

Just as groceries, prescription drugs, medical devices, rent and condo fees are currently exempt and will remain so after harmonization, house purchases (up to $400,00) could also be exempt and the rate could be reduced to a combined, say, 10 per cent from the proposed 13 per cent to eliminate the tax-gouging element of the current proposal.

In other words, don’t stop harmonization: that’s the “baby” and is a good idea. Do lower the rate of tax from the proposed 8% Ontario portion to something closer to 5%—the current rate is the dirty bath water that should be thrown out.

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