October, 2009 - Bill Bennett’s MLA Column

Harmonized Tax is Avenue to Provincial Trade October 21, 2009

Much has been said about sales tax harmonization in Canada. In each of the provinces where a provincial sales tax continues to exist, separate and apart from the goods and services tax, business groups and governments continue to review the merits of harmonization. But despite the similarities of those discussions, our voices remain distinctly regional, without recognizing the opportunity harmonization presents to stimulate the Canadian economy from coast to coast to coast.

That changed when chambers of commerce and boards of trade from across the country resoundingly endorsed sales tax harmonization at the recent Canadian Chamber of Commerce annual general meeting, encouraging the federal government to bring all remaining provinces on board.

The merits of harmonization have been well documented. The production side of the economy becomes virtually sales tax free when provincial sales taxes on business inputs join GST as qualifying for rebates. This lower cost of operating will encourage more firms to reinvest in their operations, increasing their productivity, creating more jobs, raising Canadians’ standard of living, and in many cases, rivaling their competitors by using savings to generate lower prices on their products and services. In a harmonized environment, business investment becomes more attractive, luring more domestic and international investors. On the collection side, businesses further save costs and time as they only need to collect one tax for government, not two. Remittances and audits become simpler. Governments also benefit from the simplification of tax collection.

In addition to all those well known arguments, though, one has been overlooked. Sales tax harmonization will, if applied across this vast country of ours, break down what is one of the many obstacles we have erected to doing business with each other.

It’s not often that an issue unifies us from sea to sea to sea. Ironically, this summer, another barrier to business has done just that. The “Buy American” clause imposed by the U.S. Congress has succeeded in uniting communities across Canada, and in fact voices from all walks of life, in a chorus of words against protectionism. This is just the latest effort, in fact, to reduce barriers at our border with our largest trading partner, the United States. For decades, Canadian groups, including many Chambers of Commerce, have studied the barriers, quantified the loss to our collective economies, sent letters and delegations, and lobbied vigorously with great support across Canada.

Canadians rail against any barriers imposed by the U.S. on trade between our two countries. And yet, in our own backyard, self-imposed barriers receive very little scrutiny. Sales tax harmonization will remove a significant obstacle to trade from one province to the next.

A single sales tax provides a chance to standardize the taxes applied to all goods and services, regardless of their size and shape; to treat consumers, no matter their purchase, the same; to consolidate the collection and auditing of a major source of tax revenue in the hands of one level of government, instead of a dozen; to simplify our tax policies so that a garment company from Ontario can sell its product to a retail chain in British Columbia within the same set of rules.

It’s an opportunity to get our own house in order.

Ontario and British Columbia have followed the leads of Quebec, Nova Scotia, New Brunswick and Newfoundland, despite great opposition. Manitoba, Saskatchewan and P.E.I., where provincial sales taxes are applied, have an opportunity to follow.

It’s time we stopped talking about sales tax harmonization as if it were a matter merely of provincial interest, and started talking about it as an issue of national interest. And perhaps the same level of passion that’s applied to the fight against “Buy American,” could be applied to breaking down trade barriers in our own country so that we all find it easier to buy Canadian.