Harmonization of Ontario retail sales tax with Canada's goods and services tax.

• Author: Riley, Phil W.

February 26, 2009

On February 26, 2009, Tax Executives Institute submitted the following comments to the Ontario Ministry of Finance, urging the harmonization of the province's retail sales tax with the federal Goods and Services Tax in Canada. The comments were prepared under the aegis of TEI's Canadian Commodity Tax Committee, whose chair is Phil W. Riley of ArcelorMittal Dofasco Inc., with assistance from the Institute's Toronto Chapter. TEI General Counsel Mary L. Fahey served as staff liaison on this project.

On behalf of Tax Executives Institute, I am writing to express TEI's support for the replacement of the current Ontario Retail Sales Tax with a value-added tax that is similar or identical in nature to the federal Goods and Services Tax. Substituting a value-added tax system for the current provincial system will eliminate the cascading effect of sales tax on business inputs and promote a more neutral and competitive business environment.

Background

Tax Executives Institute is the preeminent association of business tax executives. The Institute's 7,000 professionals manage the tax affairs of 3,200 of the leading companies in Canada, the United States, Asia, and Europe and must contend daily with the planning and compliance aspects of Canada's business tax laws. Canadians make up 10 percent of TEI's membership, with our Canadian members belonging to chapters in Calgary, Montreal, Toronto, and Vancouver, which together make up one of our nine geographic regions. Our non-Canadian members (including those in Europe and Asia) work for companies with substantial activities in Canada. In sum, TEI's membership includes representatives from most major industries including manufacturing, distributing, wholesaling, and retailing; real estate; transportation; financial services; telecommunications; and natural resources (including timber and integrated oil companies). TEI is concerned with issues of tax policy and administration and is dedicated to working with government agencies to reduce the costs and burdens of tax compliance and administration to our common benefit.

The Need For Harmonization

Four provinces in Canada have led the way in terms of replacing their retail sales taxes with a value-added tax, though they have taken two slightly different approaches in doing so. Ontario should take a similar path.

Studies by the C.D. Howe Institute and the Centre for Spatial Economics have shown that harmonization--by changing how the tax is...