Harmonized sales tax will create jobs

Posted on August 22, 2009 in Debates, Governance Debates

TheStar.com – Opinion/Comment – Harmonized sales tax will create jobs: By doing the right thing now, Queen’s Park will help the Ontario economy recover faster

Sometimes governments have to do the right thing even in the face of political opposition. That is what leadership is all about. It is what the Ontario government has done in its initiative to harmonize the provincial sales tax with the GST.

It is the right thing for the economy. It will preserve jobs in Ontario’s beleaguered manufacturing sector. And it is the right thing for Ontarians.

We should learn some lessons from the recession that has battered Ontario and the Canadian economy over the past year. Perhaps one of the most important is that you have to create real value in order to sustain employment and generate income growth.

The financial market crash shows that no one can create lasting wealth simply by spinning other people’s money around and around.

Eventually that money needs to go into producing goods and services that people want to buy. Otherwise it leads to financial bubbles and major trouble for the economy. Another lesson of the recession is that, like it or not, our economy is affected by global market conditions.

We must compete around the world for customers and suppliers, skills and intellectual property, credit and investment.

Our companies have to be world class. And so, too, does the business environment in which they operate. Competitive pressures have only become more acute as a result of the recession.

Budget measures introduced by our governments also serve as a healthy reminder that taxpayers must eventually pay the bill for the stimulus and income support programs we rely on to soften the blow of recession.

As demand for public services (education, health care and social services) continues to grow, we should be keenly aware that the way taxes are raised has a significant impact on investment, innovation and job growth – all of the elements necessary to sustain a healthy economy.

And we must realize that all taxes are ultimately paid by consumers, either in the form of higher prices or lost productivity and lost jobs.

These lessons are becoming more obvious as the economy slowly begins to recover. Business as usual is not an option for governments, or for the enterprises upon whose success the recovery ultimately depends.

Sales tax harmonization is exactly the kind of forward-looking policy reform that will be critical in strengthening the provincial economy and speeding along recovery. In fact, it is the single most important step that can be taken to boost the provincial economy and create job opportunities in the future.

Harmonization will save businesses money, lowering the cost of investments in innovation and new technologies, productivity and environmental improvements and the development of new markets – all of which are extremely important in rebooting the economy, securing jobs and helping Ontario businesses make the changes they require to compete and grow in global markets.

Ontario businesses now pay $5 billion every year in provincial sales tax when they purchase inputs like construction materials, office supplies, energy, legal services, furniture, business vehicles and equipment they need to produce goods and services.

That money will be saved under a fully harmonized sales tax. There will be additional savings for businesses, as well as the government, as a result of lowering the costs of tax administration.

Tax experts agree about the benefits of the harmonized sales tax.

The introduction of a 13 per cent value-added tax, combined with recently announced corporate tax cuts and the elimination of the capital tax, will give Ontario one of the most favourable tax systems in the world for business investment.

That is extremely important for Ontario companies that are competing to attract and retain the investment the province needs to develop the advanced manufacturing, knowledge-intensive and high-value economy of the future.

But it is Ontarians who ultimately stand to benefit from tax harmonization. Business savings will be directed to supporting employment in more competitive industries as well as to reducing consumer prices. That was certainly the experience of the Atlantic provinces where business investment in new products, technologies and markets rose 12 per cent while consumer prices fell in the aftermath of tax harmonization.

The tax rebates proposed by the Ontario government will further reduce costs for consumers.

The bottom line is this. Sales tax harmonization will help build a more competitive business sector in Ontario capable of creating jobs in the future because it is investing today in new products, new technologies, new skills and new markets.

By doing the right thing now, we will help the Ontario economy recover faster.

We will be in a stronger position to pay off the debts we have rung up on the way in and out of recession.

Above all, we will continue to generate the job and income growth that is so important in maintaining the quality of life that Ontarians enjoy both today and in the future.

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This entry was posted on Saturday, August 22nd, 2009 at 4:45 pm and is filed under Debates, Governance Debates. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.

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