Harmonize PST, GST says think-tank
The Leader-Post (Regina)
Fri 02 Nov 2007
Page: D1 /
FRONT
Section: Business & Agriculture
Byline: Bruce Johnstone

Source: The Leader-Post

Harmonizing the provincial sales tax (PST) with the goods
and service tax (GST) would help make Saskatchewan a more attractive place for
businesses to invest, according to the C.D. Howe Institute.

"One of the best tax-reform initiatives Saskatchewan could undertake (is)
making the provincial sales tax more like a value-added tax -- possibly by
harmonizing it with the federal GST," the Toronto-based think-tank said in a
report released Thursday.

By harmonizing the PST with the GST, Saskatchewan would be removing sales tax
on inputs -- items used in the production of goods -- which account for about
$400 million in annual PST revenues.

"Eliminating sales taxes on business inputs would move Saskatchewan out of
the group of five provinces with such taxes,'' the report said.

More importantly, harmonization along with other targeted tax cuts would make
Saskatchewan's corporate tax regime more competitive with Alberta's, the report
said.

"Saskatchewan is still levying a retail sales tax that falls very heavily on
business inputs,'' said Bill Robson, president and CEO of the C.D. Howe Institute and one
of the co-authors of the study.

"What is surprising is the importance of that particular tax in creating the
differences that you see across the provinces in the marginal (effective) tax
rates on investment. Saskatchewan is relatively high in sales taxes and (taxing
inputs) is a big reason why it is.''

According to the study, Saskatchewan, with its five-per-cent PST,13-per-cent
general corporate income tax rate and 4.5-per-cent small business tax rate, has
a marginal effective tax rate (METR) on 30.2 per cent on capital.

By contrast, Alberta's METR is 23 per cent, while the national average is
30.9 per cent. But provinces that have harmonized sales taxes have much lower
METRs on capital investment, ranging from 25.2 per cent for Quebec to 6.6 per
cent for New Brunswick.

"Saskatchewan could solve a lot of the problems it has on that front if it
were to harmonize with the GST or move the PST in a more GST-like direction.''

Robson added that the recently announced cut in the GST from six to five per
cent, effective Jan. 1, 2008, would make implementing harmonization that much
easier.

"There's a spoonful of sugar to help that medicine go down.'' he said.

The Vicq Committee, which proposed a major reform of business taxes to the
provincial government in 2005, recommended harmonization of the PST with the GST
once the province's dispute with Ottawa over equalization payments was settled.

Idnumber: 200711020096
Edition: Final
Story
Type: Business
Length: 409 words