What Saskatchewan needs now, if it is to enhance its allure to business investment and the jobs that follow, is readily apparent. It is time that Saskatchewan put a priority on harmonizing the Provincial Sales Tax (PST) with the federal Goods and Services Tax (GST), a move that lowers tax costs for businesses and enables them to charge lower prices to consumers. The people, businesses and government of Saskatchewan should also ensure that the federal government does its part in helping along this transition by providing reasonable funding.

The federal GST is a value-added tax that allows businesses to claim a tax credit against the GST they pay on purchases. In contrast, the PST does not allow businesses to claim input tax credits, and thus increases their tax bill and, therefore, the final price to consumers. In moving to a Harmonized Sales Tax (HST), a province eliminates its PST and instead collects a share of the GST. Businesses would get to reduce their taxes and reduce the cost of complying with two different sales taxes.

While Saskatchewan has markedly improved its competitiveness by reducing capital and corporate income taxes, the PST is arguably the greater culprit in hampering the productivity of Saskatchewan's businesses. In Saskatchewan, the PST increases the tax rate on investment by nearly nine percentage points. In contrast, the corporate income tax increases the cost of investment by only six percentage points. Most importantly, harmonization would move Saskatchewan's tax burden on investment below Alberta's.

In the last two federal budgets, the federal government has stated that it will work with provinces to harmonize their PSTs with the GST, but has not yet put its money where its mouth is. If the federal government really wants to help encourage investment in Saskatchewan, it should give the province at least $280 million over four years to compensate it for the lost revenues from moving the tax base away from business inputs and towards a value-added base. The revenue boost to provincial coffers would not jeopardize any services or already planned tax breaks. Instead, the only recent funding the federal government gave to Saskatchewan was $240 million to encourage investment in carbon capture from coal power.

Another political hurdle provinces face is that introducing a HST would put a more visible tax on consumers. But the PST is like a shell game, where businesses hide the tax they pay on their goods and move it somewhere else with higher costs passed on to consumers. The evidence from the Atlantic Provinces, which have harmonized their sales taxes, is that consumer prices will drop in line with the decrease in taxes paid by businesses.