Ontario to Merge Sales Tax with Federal Tax: Reports

(Reuters)

The government of Ontario will unveil tentative plans to harmonize its provincial sales tax with the federal sales tax in its budget on Thursday as it tries to help businesses weather the recession, several newspapers reported on Wednesday. The proposed reforms would see Ontario merge its 8% sales tax with the 5% federal good and services tax.

The reports said the changes are designed to help make businesses more competitive since the new harmonized system would allow companies a refund on taxes paid on goods and services to run their operations.

The move might anger consumers, however, as they may see increased taxes on items such as heating oil, diapers and children’s clothing, all which are now exempt from the provincial sales tax.

Earlier this month the province’s finance minister said Ontario would run a deficit of around C$18 billion ($14.6 billion) over the next two years as it spends money to try to stimulate the economy.

The Globe and Mail said the tax reforms are part of a move by the province to address its reversal of fortunes as the economy of Ontario, once the country’s richest province, has been one of the hardest hit by the recession. Read more here.