Friday, October 2, 2009

Ontario discusses HST break for mutual fund industry

Premier Dalton McGuinty said Wednesday his government is talking to the mutual fund industry about a possible exemption to the harmonized sales tax.

There is no agreement now, but the Ministry of Finance is holding discussions with mutual fund companies and other groups to make sure the government "gets it right" on tax harmonization, McGuinty said.

In the March 26 budget, Ontario announced plans to merge the eight per cent provincial sales tax with the federal GST.

The move is aimed at reducing the cost of doing business in the province, but it would hike the cost of many items now exempt from the provincial levy onto the backs of consumers.

British Columbia recently signed a similar proposal.

Both laws are set to come into effect July 1, 2010.

Even consumers outside B.C. and Ontario would be affected if the companies from whom they purchase securities are registered in one of those provinces.

The fund industry, like many others, has come out strongly against the proposal.

"A harmonized sales tax could drain over half a billion dollars a year from the investment accounts of Ontario residents," CI Financial Corp. Stephen A. MacPhail said.

The company estimates that for every $20,000 invested in a mutual fund, consumers would pay $52 per year to the HST.

CI is considering launching a separate set of mutual funds for Alberta residents, where there is no sales tax.

A TD Economics report earlier this month concluded HST legislation in Ontario and British Columbia would save businesses $6.9 billion annually, while shifting the tax burden from businesses to consumers.

McGuinty wouldn't say whether he was sympathetic to the industry's complaints about merging the eight per cent Ontario sales tax with the federal GST.

But his comments appear to put him at odds with Finance Minister Dwight Duncan, who has reportedly taken a hard line against the mutual fund industry's complaints about the HST.

According to a report in the Globe and Mail earlier this month, the minister's office has threatened to release a damning report on the negative impact of management fees unless the industry backs off.

NDP Leader Andrea Horwath says taxpayers should be outraged that the governing Liberals are bowing to big business instead of trying to find more exemptions for ordinary families for everyday items like home heating oil.

Conservative Peter Shurman says lots of groups have a case against the HST, and the tax needs to be stopped now before it's implemented next July.

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