The Economic Club of Canada

The Economic Club of Canada

June 15, 2010 11:37 ET

An Open Letter to Ontarians and British Columbians

TORONTO, ONTARIO--(Marketwire - June 15, 2010) - Effective July 1, 2010, in Ontario and British Columbia Retail Sales Tax (RST) will be replaced with a value-added tax (VAT) and combined with the federal Goods and Services Tax (GST) to create a federally administered harmonized sales tax (HST).

We strongly support implementation of the HST as we believe it will promote investment, jobs, and higher wages. With more than 140 countries and four other provinces having adopted a VAT, the HST will elevate provincial competitiveness. Currently, the RST is charged on a broad range of inputs purchased by businesses to manufacture products and provide services. This tax becomes embedded in the cost of goods at each stage of the production, distribution and retail processes. The result is a compounding of the tax that is ultimately paid by consumers through higher prices. 

The RST places British Columbia and Ontario at a competitive disadvantage compared to many jurisdictions when it comes to attracting investment and creating jobs.

The HST, by contrast, will remove this cascading tax by refunding the sales tax paid on most business inputs, including materials, supplies and equipment. Without this compounding tax, Canadian goods and services will be more competitive in domestic and export markets. As was the case with the GST and in the provinces shifting to a value-added sales tax, businesses will pass these savings onto consumers.

Businesses, large and small, will face lower administrative costs from complying with one sales tax system instead of two. Lower business costs, especially on capital equipment, will encourage investment and economic activity. Lower business costs will ultimately allow price reductions on many consumer purchases, including big ticket items, such as automobiles and computers.

The HST will enhance competitiveness, encourage new investment, and create jobs. It represents sound public policy.

Craig Alexander, Senior Vice President & Chief Economist, TD Bank Financial Group    
    Victoria Barham, Chair, Department of Economics, University of Ottawa
Prof. Werner Antweiler, Ph.D., Sauder School of Business, University of British Columbia    
Sam Boutziouvis, Vice President, Economics and International Trade, Canadian Council of Chief Executives   Dr. Brian Lee Crowley, Managing Director, Macdonald-Laurier Institute
Derek Burleton, Associate Vice President and Director of Economic Analysis, TD Bank Financial Group   David A. Dodge, OC, Senior Advisor, Bennett Jones LLP & former Governor, Bank of Canada
Mel Cappe, President, Institute for Research on Public Policy   Don Drummond, Economics Advisor, TD Bank Financial Group and Distinguished Visiting Scholar, School of Public Policy, Queen's University
John Chant, Professor Emeritus, Department of Economics, Simon Fraser University   Jean-Yves Duclos, Professeur titulaire, Département d'économique, Université Laval
Dr. Sherry Cooper, Executive Vice-President and Global Economic Strategist, BMO Financial Group & Chief Economist, BMO Capital Markets   Dr. Anne Golden, President and CEO, Conference Board of Canada
Len Crispino, President and Chief Executive Officer, Ontario Chamber of Commerce   Glen Hodgson, Senior Vice-President and Chief Economist, Conference Board of Canada
Dr. Warren Jestin, Senior Vice-President and Chief Economist, Scotiabank   Steeve Mongrain, Associate Professor, Department of Economics, Simon Fraser University
Dr. Christoph Luelfesmann, Professor and Graduate Program Chair, Department of Economics, Simon Fraser University   Al O'Brien, CM, Fellow, Institute for Public Economics, University of Alberta
The Honourable John Manley, PC, President and Chief Executive Officer, Canadian Council of Chief Executives   Dr. Tim O'Neill, President, O'Neill Strategic Economics and former Chief Economist, Bank of Montreal
Roger Martin, Dean, Rotman School of Management, University of Toronto   Dale Orr, PhD, President, Economic Insight
James Milway, Executive Director, Martin Prosperity Institute, Rotman School of Management, University of Toronto   Finn Poschmann, Vice President, Research C.D. Howe Institute
Dr. Jack M. Mintz, Palmer Chair in Public Policy, School of Public Policy, University of Calgary   William B.P. Robson, President and Chief Executive Officer, C.D. Howe Institute
    Dr. Nicolas Schmitt, Chair, Department of Economics, Simon Fraser University
Earl Sweet, Managing Director and Senior Economist, BMO Capital Markets     
Dr. Arthur Sweetman, Professor, School of Policy Studies, Queen's University    
George Vasic, Chief Economist, UBS Securities Canada Inc.    
L.R. Wilson, Chairman, CAE Inc. & Chancellor, McMaster University    
Craig Wright, Chief Economist, RBC Financial Group    
Please note: The Economic Club of Canada is a non-partisan organization. The views expressed in this letter are those of the signatories and do not in any way reflect the views of The Economic Club of Canada

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