Ontario budget could merge sales tax with GST

Printed copies of Ontario's 2009 budget are delivered to Queen's Park Wednesday.(John McGrath/CBC)

The Ontario Liberal government is expected to introduce harmonization of the province's sales tax with the GST in its budget on Thursday to ease costs for struggling businesses and stimulate the province's sagging economy during the global recession.

Opposition and business leaders have long pushed for the measure, arguing the province's corporate taxes are too high, hinder investment and make the province less competitive.

Premier Dalton McGuinty hinted the move was in the works after admitting he had heard from numerous business groups advocating a merger of the taxes.

Provincial Finance Minister Dwight Duncan has already revealed the coming budget will bring Ontario into a deficit of $18 billion over the next two years, along with a $27.5-billion infrastructure program to create jobs in the wake of hundreds of thousands of jobs lost in the province's manufacturing sector.

But after a series of good-news pre-budget announcements on infrastructure and education funding, the premier cited the need for budget secrecy for his inability to answer opposition MPPs' questions Tuesday on tax harmonization.

$1,000 credit for some families

During question period at the legislature, the NDP pointed out the single sales tax would also mean consumers would be left paying higher taxes on basic goods such as diapers, shoes and children's vitamins.

New Democrat Leader Andrea Horwath expressed concern the merged tax would "nickel-and-dime families."

"These are all the kinds of items, the kinds of things people buy every single week," Horwath told the legislature. "Especially in times of difficulty, families do not need this extra tax."

Many of those items, however, will remain exempt, the Globe and Mail and the Canadian Press reported, citing unnamed sources.

Those reports also said the budget will include a provision giving families earning less than $160,000 a year a $1,000 payment.

The money would be delivered in three separate cheques over the course of a year to help people cope with the change to the 13 per cent harmonized sales tax, the reports said.

McGuinty said the budget would have two main objectives: to help families weather the recession, and to help businesses prepare for the eventual return to a period of economic growth.

"What Ontarians want us to do is to do what's right," McGuinty said. "I don't think that we've been put in a position of government to choose what's easy."

The Ontario Chamber of Commerce has estimated merging the taxes would save companies about $100 million a year, but acknowledges the price of some household goods would increase in the short-term.

With files from the Canadian Press