Canada chemical industry welcomes major Ontario tax reform

29 June 2010 15:03  [Source: ICIS news]

TORONTO (ICIS news)--Canada’s chemicals industry welcomes a major tax change in Ontario that will make manufacturing in the country’s largest province less costly, a trade group said on Tuesday.

The tax change, due to come into effect on 1 July, will combine an 8% provincial sales tax (PST) with a 5% federal goods and services tax (GST) into one 13% harmonised sales tax (HST).

At the moment, Ontario’s manufacturers are not allowed to deduct PST from the cost of materials and other products they buy. With the HST, business will be able to claim full tax credits for the PST and Ontario will have a value-added tax system comparable with those in the EU and most industrialised countries.

However, the reform means Ontario's consumers will have to pay taxes on many products and services that previously were exempt from the provincial tax.

The Chemistry Industry Association of Canada (CIAC) said the HST was crucial to both the short-term recovery and the long-term prosperity of Ontario's manufacturing sector.

"This [tax reform] was a much-needed first step to help make Ontario manufacturers more competitive, to encourage investment and innovation, and to safeguard Ontario manufacturing jobs," said CIAC president Richard Paton.

The tax change would put Ontario manufacturers on an equal footing with other jurisdictions with similar tax policies - including five other Canadian provinces and 130 countries worldwide, the chemical trade group said.

“While some Ontarians may find it difficult to see value in the government's decision to apply the HST to services that were previously PST-exempt, the benefit the HST will have for the overall economy should not be overlooked,” it said.

Economists had estimated that Ontario would see Canadian dollar (C$) 47bn ($45bn) in increased capital investment as a result of the HST, as well as the creation of 590,000 new jobs, the group added.

Chemical production is the third largest manufacturing sector in Ontario.

The chemical trade group did not comment on the situation in Canada’s western British Columbia province, where the HST is also due to be introduced from 1 July.

In that province, the public has strongly opposed the introduction of the HST, prompting a former British Columbia premier to launch a petition against the tax. If the petition succeeds, the provincial government may be required to hold a referendum on the tax.

($1 = C$1.05)

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