Harmonized Sales Tax May Be Key To Reducing Ontario's Rich-Poor Gap

November 24, 2009 2:04 p.m. EST

Toronto, Ontario (AHN) - Ontario's Task Force on Competitiveness, Productivity and Economic Progress released on Monday its eighth yearly report. The study showed that Ontario - once Canada's leading province - is below the median in terms of gross domestic product per capita among 16 North American jurisdictions.

The report said Ontario's GDP per capita in 2008 was below $7,000 or 13 percent lower than the 16's median, although it was a slight improvement from 2007 level when the province's GDP per capita was $6,600.

The report confirms that Ontario's decision to harmonize its sales tax by June 2010 is a correct one, even though it is difficult to sell as a political decision. Task Force Chairman Roger Martin explained in a statement, "Converting our provincial sales tax to a value added tax and harmonizing it with the federal goods and services tax is a tough sell politically - but it is the right thing to do. Coupled with the reductions in our corporate tax rates, Ontario will move from one of the worst to one of the best tax regimes in the world for encouraging new business investment."

Martin added that because of the huge provincial budget shortfall, Ontario may drastically reduce investment in education which could negate the gains made by the provincial government's spending on post secondary education from 2004 to 2009. He pushed for renewal of these investments to hike access among Ontarians to post secondary education, increase the number of masters' graduates and improve classroom experience for students.

Martin stressed, "Our challenge is to steer through the current turbulence, avoiding the temptation and traps of poor economic policy. We must strive to stay on track to achieve our prosperity potential through an attitude of positive determination, wise investments, excellent tax policy, and structures that encourage innovation."