Ontarians are likely to vent their spleen over the introduction of the HST by turfing the McGuinty government. That will make us feel better, but will not change a thing: once in, the tax is here to stay.
The scenario is familiar to anyone who recalls the well-deserved pasting taken by Brian Mulroney – the country’s most hated politician – who introduced the GST only to see the Liberals embrace it despite promises to the contrary while they were in opposition.
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. These recent revelations are sure to make Ontarians angrier still over what is a blatant tax grab, but increasingly it looks like a done deal.
The federal government, which has been pushing all of the remaining provinces – Quebec, Newfoundland, New Brunswick and Nova Scotia are already onside – to harmonize the sales taxes, is offering billions in compensation to make the deal more palatable.
The idea 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.
For that $500 million in business savings, we’ll pay some $2.5 billion in extra taxes. 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 it 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 the elimination the entire department responsible for collecting PST, to be rendered redundant.
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.