Flaherty's HST pitch fails to woo holdouts

A day after Ottawa offered cash to provinces to harmonize their sales taxes across the country, the fewholdouts remain cool to the HST idea.

On Tuesday, Finance Minister Jim Flaherty said Ottawa was willing to offer financial support to provinces choosing to harmonize their provincial sales tax with the federal GST.

Business groups like the idea because they argue it reduces red tape and lowers the tax on investment. But harmonization detractors argue it ends up costing consumers more in real terms because the GST applies to more goods and services than the provincial levy.

Though he stopped short of rejecting the plan outright, P.E.I. Premier Robert Ghiz says it will take more money than Ottawa is currently offering if he is to consider harmonizing provincial sales tax with the GST.

He said the revenue loss to the province must be offset before considering any harmonization proposal, and specifically requested that exemptions be allowed for home heating fuel and clothing.

In P.E.I.'s case, the blended tax would actually be lower. He acknowledgedthe planwould mean a tax cut for Islanders, but he also wants to ensure the province can afford to protect those most vulnerable, he said.

In Manitoba, a spokesperson for Manitoba Finance Minister Greg Selinger confirmed the province is looking at the offer. The province's stance has traditionally been against any harmonization plan, but Ottawa's subsidy offer appears to have prompted consideration ofthe proposal.

'It's a tough political decision': economist

Saskatchewan Premier Brad Wallhasn't warmed upto the idea.

He was a ministerial assistant when former Conservative premier Grant Devine harmonized sales taxes in 1991 in what critics called a $200-million tax grab. Devine was defeated in the next election by the New Democrats, who split the taxes up again.

And the public uproar over harmonization in Nova Scotia contributed to the Liberal government's defeat in 1999.

"It's a tough political decision because it shifts the burden of taxation from businesses to consumers," said Derek Burleton, an economist and director of economic analysis at TD Bank.

"Politically, it's a challenging choice, but economically, it's the right one."

B.C. will receive $1.6 billion from Ottawa to help grease the wheels when the single tax takes effect July 1, 2010.

Ontario is getting $4.3 billion over two years. The Ontario government, which announced the change in its March budget, hopes to ease consumer pain and minimize the political fallout by offering cheques of up to $1,000 to families and individuals when it merges the taxes next July

B.C. Premier Gordon Campbell has defended the move, saying the new 12 per cent blended tax will be the lowest in Canada and will save business millions of dollars a year, particularly in the construction, forestry and mining sectors.

But provincial NDP Leader Carole James has come out staunchly against the plan, launching a petition to block it before it becomes law next summer.

James says the HST will cost B.C. consumers $4 billion over four years in higher taxes for everything from restaurant meals and real estate to bicycles, haircuts and movie tickets.

She calls it a regressive tax that will make it tough on families, kill jobs and hurt small businesses just when the B.C. economy needs a break.

Campbell admits the HST will be difficult for some sectors and he's promising to work with them to help them through the transition.