Ontarians, already in no mood to embrace the new harmonized sales tax, will be even more incensed to learn prices at the LCBO won’t be dropping. Instead, they’ll be climbing.
Although the eight per cent rate will replace a 12 per cent tax, the liquor store claims lowering prices would be irresponsible – apparently we’d all become heavy drinkers due to the nickels and dimes we’d be saving. There’s also a price increase on the way, essentially boosting the LCBO’s profit margins.
That move would be contrary to Premier Dalton McGuinty’s sales pitch: savings enjoyed by businesses will be passed on to consumers. Since the government owns the LCBO, this would be a good opportunity to order the agency to do something that benefits the public.
Don’t hold your breath. The tax and all its downsides are here to stay.
The permanent nature of the tax is embedded in the agreement between Ontario and the federal government: the HST must remain in place through 2015, five years after its introduction next July. As well, the tax rate of 13 per cent is fixed until at least 2012.
Support for the tax is predicated on the savings that will come from efficiencies, as businesses will see taxes drop and will face a more streamlined tax reporting and remittance process. There are advantages to that. But consumers certainly shouldn’t expect to see those savings passed on to us: The same promise was made when the GST replaced the manufacturers’ sales tax, but prices only went up.
Everything is going to cost more, including eight-per-cent jumps in such previously exempt essentials such as home heating and gasoline. This tax benefits only a few at the expense of the rest of us. That reality is solidified by the pro-HST work of a group calling itself the Smart Taxation Alliance, which includes the likes of the Canadian Council of Chief Executives, the Ontario Chamber of Commerce and the Canadian Manufacturers & Exporters, groups whose policies and goals are typically contrary to the interests and well-being of average Ontarians.
Harmonizing the sales taxes would be the latest in a string of changes to remove taxes from businesses and place them on individuals. That was the real reason behind the GST, ongoing adjustments to property tax rates, free trade and the trickle-down rationale behind cuts to corporate tax rates, to name a few.
Proponents, the biggest special interest group of all, claim the moves make businesses more competitive, often citing job creation and reduced prices, benefits that rarely surface. Critics, on the other hand, have documented these tactics as no more than a race to the bottom, allowing corporations to flit over borders easily and to work the system to minimize already shrinking tax levies.
Not surprisingly, there is no talk of making this change revenue-neutral – both the province and the feds will rake in more money. If McGuinty wants to make the change, he can start by reducing the PST rate to ensure the government collects no more in sales taxes than it does today. Or adjust income taxes to offset the extra costs we’ll all be paying. In either instance, a reduction in government spending is in order, starting with administrative layoffs.
All of this is wishful thinking, as increased taxes are needed to pay for the deficit, and governments lack the backbone to make necessary cuts.