Canada - ‘GST regime may mitigate the tax cost’

Saskatchewan Finance Minister Rod Gantefoer says he has rejected an offer by the federal government to harmonize the PST with the GST.

Both the provincial sales tax and the federal goods and services tax are five per cent, but Ottawa's tax covers a wider selection of items. Saskatchewan doesn't tax restaurant meals, for instance, while Ottawa does. With harmonization, both taxes would apply to the same array of goods and services.

But Gantefoer said Wednesday that the provincial Finance Department calculated that harmonization would cost taxpayers in Saskatchewan an extra $400 million every year.

That's assuming the PST would be kept at five per cent and not reduced as some harmonization proponents have suggested.

Gantefoer said Ottawa was offering a one-time payment of $180 million to help offset the $400 million increase.
 
"There was nothing further forthcoming," Gantefoer said. "A similar review was done by the previous administration … there was just not anywhere close to enough dollars made available for us to significantly offset the impact on our consumers. So the offer was rejected."

Furthermore, Gantefoer says, a harmonized PST would have applied to new home purchases and the government believes that would only serve to dampen the new home market.

The idea of harmonizing Saskatchewan's tax with Ottawa's has been on the back burner since former premier Grant Devine's Progressive Conservatives proposed the idea in the early 1990s.

Proponents said it would reduce paperwork and result in fairer taxation to businesses. The NDP called it a tax grab. The PCs ended up being trounced in the 1991 election.

Source : CBC Toronto - Toronto, Ontario, Canada, dated 23/01/2008