Ontario Sales Tax Reform: Small Pain for (Hopefully) Longer Term Gain

(CBC News)

Ontario’s budgetary move to blend its provincial sales tax with the federal goods and services tax might have some political watchers puzzled.

After all, Ontario has been hard hit by a manufacturing meltdown, especially in the auto sector. Thus, provincial unemployment is rising, making Ontario residents particularly crabby these days.

To analysts, boosting prices on household goods does not seem the best way for Ontario’s premier, Dalton McGuinty, to wiggle his way into voters’ good graces.

But, most economists sing in unison when it comes to tax harmonization.

These practitioners of the dismal science generally agree that, when a province adds its sales tax, eight per cent in Ontario’s case, to the current five per cent national GST, the region and the country as a whole win in terms of economic expansion and increased productivity.

“This tax reform is long overdue as Ontario struggles to put its economy on a better growth path,” wrote Jack Mintz, a University of Calgary economics professor and former president of the C.D. Howe Institute recently. Read more here.