Manitoba considering harmonized tax

Manitoba Finance Minister Greg Selinger is weighing the pros and cons of harmonizing the provincial sales taxwith theGST.

On Tuesday, Finance Minister Jim Flaherty said he is prepared to cut cheques to Saskatchewan, Manitoba and Prince Edward Island to sign on to tax harmonization.

Ontario and British Columbia both signed lucrative deals this year that will give them billions of dollars to merge their provincial sales taxes with the federal GST.

'From a public perspective you might see a tax in a place where they haven't been before and [some people are] concerned about that.' Greg Selinger, Manitoba finance minister

The P.E.I. and Saskatchewan governments haven't really warmed to the idea, but Selinger said on Wednesday that he is considering it. He is calculating what a harmonized sales tax may mean for Manitobans before making any decision.

"There's two schools of thought on this: One school says that when you harmonize that, even though it's a more visible additional tax on some items some of those input taxes are reduced so that overall, you're about the same," he said.

"But from a public perspective you might see a tax in a place where they haven't been before and [some people are] concerned about that.It's not a slam dunk, one way or the other.It's something that we have to carefully consider."

Until now, Selinger has repeatedly said consumers would pay more if Manitoba introduced a harmonized sales tax, because there are a number of items on which GST is charged that PST is not in general, the new harmonized tax would be collected on such hitherto untaxed items.

For example, right now in Manitoba books and children's clothing are exempt from PST.

Colin Craig, Manitoba director of the Canadian Taxpayers Federation, said harmonization could benefit business owners, who would no longer have to pay PST on raw materials, but for everyone else "it would probably result in a cash grab" by the federal and provincial governments.

Graham Starmer, president of the Manitoba Chambers of Commerce, said other provinces have softened the blow for consumers by decreasing the PST or providing a tax rebate.

"Some provinces have found that there's an additional cost to consumers [under a harmonized tax] but the business community has been very favourable to the simplicity of the system and the fact that they are in fact saving money," he said.

There isno deadline for the province to make a decision on harmonization, Selinger said.