TORONTO - Ontario's Liberal government will introduce legislation Monday to proceed with its controversial plan to harmonize the province's eight per cent sales tax with the five per cent GST, a move the opposition parties call a blatant tax grab.
The legislation will also include a package of cuts to income, small business and corporate taxes and provide for tax rebate cheques of up to $1,000 for families to offset the HST, which will add eight per cent to many items currently exempt from the provincial sales tax.
The idea of harmonization is to make Ontario businesses more competitive by lowering their taxes, which allows them to create more jobs, said Finance Minister Dwight Duncan.
"Right now there's a hidden tax -- businesses pay tax on tax on tax," said Duncan.
"This unbuttons that, puts the money back into their pockets. They in turn hire people and also by the way, lower prices."
Critics point out that businesses may not in fact pass on their tax savings by lowering prices, but the government says competition will lead to lower prices, as it has done in other places that harmonized sales taxes.
Revenue Minister John Wilkinson, the government's lead salesman on the tax changes, said the goal is to create jobs, and notes there will be help for Ontarians to cope with the impact of an eight per cent tax increase on such things as home heating fuel and hydro bills.
"Starting in January, we'll have the lowest personal income tax rate of any province," said Wilkinson.
"And in July when we bring in the HST, we'll be more than doubling the permanent tax grants that are available to low income Ontarians, seniors on a fixed income and middle income families with a lot of children."
There will be more than $1.1 billion annually in personal income tax relief from a 16.5 per cent cut on the first $37,000 of taxable income -- which Ontario says will be the lowest rate of any province. Ontario families and individuals who earn up to $80,000 get an average personal income tax cut of ten per cent.
Ontario will also lower the small business tax rate from 5.5 per cent to 4.5 per cent and eliminate the 4.25 per cent small business surtax, "the only province in this country to eliminate that barrier to growth," said Wilkinson.
The general corporate tax rate will be cut from 14 per cent to 12 per cent and then reduced to ten per cent over three years, while the corporate tax rate on the manufacturing, processing and resource sectors will be cut from 12 per cent to 10 per cent.
Even though it has the support of the Chamber of Commerce and many in the business community to move to a single sales tax, the government knows it still has a hard sales job convincing ordinary Ontario consumers that the HST will be good for them.
The province commissioned a study which shows its tax changes will help create almost 600,000 jobs over the next 10 years.
"This tax package, this job creation package is complicated," admitted Duncan.
"This overall tax package is about creating jobs, building this economy as we come out of the downturn."
However, the National Citizens Coalition estimates the HST will cost the average taxpayer an additional $800 to $1,000 annually and vows to fight the move.
Ontario's Progressive Conservatives oppose harmonization as a "massive tax grab," even though it was their federal Conservative cousins who convinced Ontario to sign on to the idea, with the help of a $4.3 billion grant from Ottawa.
Opposition Leader Tim Hudak has been travelling the province railing against what he calls the "Dalton sales tax," which he warns will hit consumers hard.
"We always suspected this was a $3-billion greedy tax grab," said Hudak.
The New Democrats said the HST will drive up prices for consumers on a host of everyday items while giving corporations a big break.
"There's no doubt that people see this as an unfair tax because it creates a burden on people ... and it's unfair because at a time when the little guy is struggling, big corporations are going to get a huge tax giveaway," said NDP Leader Andrea Horwath.
Quebec, New Brunswick, Nova Scotia and Newfoundland and Labrador have all harmonized their sales taxes with the GST, and British Columbia will join Ontario in moving to a single sales tax on July 1. Manitoba has also indicated it too is strongly considering the idea.