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Tax Reform Essential For Job Creation and Economic Recovery

Published on December 03, 2009

TORONTO - Ontario's plan to reform and update the sales tax system by harmonizing with the GST is an essential step toward helping the province emerge from the current recession better able to compete in world markets, according to a non-partisan coalition of business leaders. The group, called the Smart Taxation Alliance, made its comments as the Legislature began public hearings into the government's HST legislation today.

"The economic and fiscal arguments for harmonizing Ontario's retail sales tax are compelling," said Rob Hattin, President of Edson Packaging in Hamilton, who spoke on behalf of the Alliance. "The current system of sales tax in Ontario is outdated. It penalizes many industries for investing in the new equipment and new technologies they need to compete globally. Further, it places Ontario manufacturers and exporters at a distinct disadvantage compared to the rest of the world by imbedding significant tax cost in the manufacturing process, artificially inflating the price of goods produced here in Ontario."

Under the current sales tax system, many Ontario businesses pay significant amounts of sales tax on their business inputs -- the equipment and materials they use in producing goods. This cost is hidden from consumers, but nevertheless impacts the final cost of all goods manufactured in Ontario. Most other jurisdictions in Canada, and indeed in the world, have moved away from this outdated approach by implementing value-added tax regimes similar to the proposed HST. These jurisdictions have eliminated the tax buried in the manufacturing process, which allows their manufacturers to compete more effectively against Ontario-made goods. Sales tax reform is essential in order to put Ontario businesses on an equal footing with their international and domestic competitors.

The Alliance argued strongly that now is the right time to move forward with tax reform because, as the world comes out of recession, companies will be looking to make new investments; without such reform, Ontario will be a less appealing jurisdiction for business investment. "We need to move forward now," Hattin said. "If Ontario's sales tax regime is allowed to continue to be a disincentive for investment and job creation, Ontario runs the risk of losing out on opportunities to attract new manufacturing jobs during the recovery."

"The status quo is not an option for many Ontario industries, particularly the manufacturing sector which is the traditional backbone of the Ontario economy," he added. "Change is urgently needed. We can no longer afford the current unfair, inefficient, and regressive sales tax regime. The question is not whether we should fear sales tax reform, but how we can work together to craft a simpler, fairer, harmonized system that applies sales tax in a more appropriate manner, minimizing inequities and opening the way for strong economic growth."


For more information contact:

Paul Clipsham, CME, 416 388-6711;
Doug Switzer, OTA, 416 903-6859;
Amy Terrill, OCC, 416 482-5222;

About the Smart Taxation Alliance

The Smart Taxation Alliance is a non-partisan coalition of leaders that endorses the planned harmonization of the provincial sales tax with the federal GST. Members include: Ontario Chamber of Commerce, AGS Automotive Systems, Canadian Chamber of Commerce, Canadian Council of Chief Executives, Canadian Council of Grocery Distributors, Canadian Manufacturers & Exporters Ontario, Certified General Accountants of Ontario, Gennum Corporation, Information Technology Association of Canada, Ontario Automobile Dealer Association, Ontario Road Builders' Association, Ontario Trucking Association, Railway Association of Canada, Retail Council of Canada, TD Bank Financial Group, TELUS, Toronto Automobile Dealer Association & Toronto Board of Trade.


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