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Ontario passes bill to create HST
The Canadian Press
Legislation to create a single 13 per cent sales tax in Ontario passed third and final reading Wednesday despite strong objections and delaying tactics by the Opposition.
Finance Minister Dwight Duncan told the legislature that blending the five per cent GST with the provincial tax will lower costs for businesses, allowing them to lower prices for consumers and hire more staff.
“Doing nothing is not an option (and) the status quo is just absolutely the wrong thing,” Duncan said in third reading debate.
“This package will create jobs.”
The government estimates the HST will help create almost 600,000 jobs in Ontario over the next decade.
In an interview from Mumbai, India, Premier Dalton McGuinty said he is convinced the HST is critical to help reposition Ontario as it comes out of a recession in which the province lost hundreds of thousands of jobs.
“I think people understand in their heart of hearts that our world has changed and the old world is not coming back,” said Mr. McGuinty.
“There are a number of things that we need to do to adjust to the new reality and secure a better future for our families, and one of those is to put in place a modern, competitive tax system.”
The opposition parties failed to convince the government to hold public hearings on the HST bill across the province, and accused the Liberals of being afraid to face a voter backlash against the new tax.
The Liberals used their majority “to ram through the HST bill as quickly as possible and with little debate as possible,” said NDP Leader Andrea Horwath.
The Progressive Conservatives reluctantly admitted defeat after weeks of trying to block the HST, including a 44-hour occupation of the legislature by two Tories, asking for frequent votes to delay proceedings, and repeatedly calling Mr. McGuinty a liar.
“When the Liberals walked out of committee hearings, they hammered home their contempt of those in this chamber, and in the public, who dared to get in the way of their rush to whatever is left in our wallets,” Opposition critic Lisa MacLeod told the legislature.
“Some may talk about antics, they may disparage stunts and they may even dismiss this fight against the HST, for them I feel regret.”
The legislation also includes cuts to corporate and income taxes that take effect Jan. 1, and one-time rebates of up to $1,000 for some families to offset the impact of the HST, which takes effect July 1.
The Tories call the HST a greedy tax grab and complain it will apply to many items exempt from the PST, including gasoline, home heating fuel and cable TV bills.
British Columbia is also set to merge its provincial sales tax with the GST on July 1, something Quebec, New Brunswick, Nova Scotia and Newfoundland and Labrador have already done.
British bankers' pain may be Canada's gain
John Greenwood, Financial Post with files from Reuters
A tax on banker bonuses introduced by the U.K. government has been sharply criticized by financial industry officials, but observers say it could help bolster Canada's position as a global financial services centre.
"Tax is a very blunt instrument to use," said Rick Waugh, chief executive of the Bank of Nova Scotia and a senior official with the Institute of International Finance, a leading lobby group for global banks.
Speaking to reporters in Washington, Mr. Waugh said the tax could have the unintended consequence of making banks in less regulated jurisdictions more competitive.
Under the U.K. rule, any bank that pays a 2009 bonus of more than 25,000 pounds will pay a 50% tax on the money.
Because companies will pay the tax rather than employees, it will have a direct impact on corporate profitability.
Business leaders in Britain worry that it will further weaken U.K. banks, which received more than a trillion pounds of bailout money, much of which has yet to be paid back.
"They are killing the golden goose that is the financial system," Neil Jones, head of European hedge-fund sales in London at Mizuho Corporate Bank Ltd. told Bloomberg. "This is unprecedented. We expect to see a further exodus of financial institutions abroad to more tax-friendly environments."
Nearly all the major Canadian banks have operations in London but observers say Royal Bank of Canada will likely be most affected due to its substantial presence.
A spokesman for RBC declined to comment.
Meanwhile, some observers speculate the new tax could strengthen Canadian firms by making them more competitive compared with their U.K. peers.
"Absolutely, it will help," said Don Drummond, chief economist at TD Bank Financial Group. According to Mr. Drummond, the tax is another in a series of measures being taken by major economies around the world in the wake of the financial crisis.
They are partly aimed at putting limits on the way banks operate, but with public debt growing explosively in so many countries, such levies are increasingly seen as a way for governments to bail themselves out of their financial troubles -- which is why observers such as Mr. Drummond predict we will see more of them.
The United States and Britain "have much more serious fiscal problems than Canada does and they don't have an awful lot of options and those seem to be the areas that they are going to lean towards."
Unlike most other major countries, Canada did not have to bail out its banks and insurance companies, because they mostly didn't get caught up in subprime investments. Canadian banking regulations are among the toughest in the world, and many analysts believe financial institutions in this country will only be modestly affected by the introduction of new global regulation.
Canada's major banks and insurers recently joined forces to work toward building Toronto as a major global financial centre, as a way to take advantage of the strong position of the country's financial system.
Mr. Drummond said the U.K. bonus tax and other measures like it will make Canada "more attractive to high priced talent."
Thursday, December 10, 2009
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