Cole,cU.

zabeth FIN:EX

F.r-cm:

Se"t~ To:

ICC:

Subje~t! .

Ffan.a.gan.,. Paul F.IN.:EX

Wedlnesday, March 25, 2009 8:01 .AiM .. -

l{ettdam .. Crraden, Rena P.AB.:iEX; Armstrong, ,Glen E F~iN: EX;' Cole., Ejj~beth FIN: EX p.atterson, Sherd PAB:EX; :Kea.s;t, Gordon PAB:EX

Re'; ,Globe and marn:: ont to harmonize?

-~ - -- original Me.s: s age. = ~ ~~-

From: Kendall ~ Cracle,I'l.~ Rena PAB: EX

1'0'; Armst rong I' Glen E FlrN: :EX; , fIa n again, Paul FIN: EX Cc,:: Patter'son" .sherrf PAS:' EX; Il(east~ Gordon PAS: EX s.ent: Wed 'Mar 25 -E)7:!"6: 39 2,ae9

Sub j act;' Fi'rJ:' Globe an d mail: ont to harmon iz e?

Hello and. good morfling.

Is there if pC!),~silbiU ty ~'tl wHl get questions on harmonidl'l,gtax. in Be? R,KC

McGuiun:ty risks COnSlJlnilii" backlash .with move to n,a1rl1101nize sales ta~ Globe -end Mail W,ednesdsy, Ml')Pch 25) 2009' Page A.91 By Ka:ren ,HoWlett TORONTO B L E: r4DING IHt TAX

$46 .. 676 ..

The blended ca,nsumptlofl tax runs the risk of infurIating ·buJ"'Idened consume'r'.S} as a' study s,ho~'S the haN11on1:zedt :s:ystein· I,dould add $45~676 to the purchase of ,a new hQm:e ,in fa,r-onto.

*f*"'t

-The Ont~rio gov,er'.FllI1ent will announce .in tomorrow's bU!Qg'et ths'it: it win sign g' teli1t,~tive accord wHh Ottawa to ntH'lUl;tnlze the provinc.e's 8 per cent pf"\ovinc:ial sales tax. -~dth the Spar cent fed.eral gQoOds lind services tcno(~ sources, familia~·r with the document sald.

The accord, ,11 first st,ep in what is expected to, be a lengthy process to reform tbe province' s sales taxJ.was~lcomed by busmess , tmt ,could finger consullllet"s~ who would end up playing "!

singleJ .blended consumption tax o.f .13 per c€i!'nt. . _ -

Consumers fsar that ta,X'es w,ould inc.rease .on basic; good.s, ~lJch as heating oil I' dlaper.s ,a:nd rhild:r.en· s c1othin,S.. a11 of which are c,Urrently exempt from Onts'riQ sales tax. Under harmo.nizatio~~ a new value-added ta.x would ap'ply to all products cOIle:red by the goods and .servie,€!s tax, and COi')SI,m:Ui:rs WOluld see one eha,l"g'e on a sale$ receipt.·

A. harnoniz:e:d syste:mwould add $45 .. ,676 to the purchase of .a new home in Torollto.~ aC,'cQrdiing to one study.

But the bigse.st poHtical risk for the gOVlE!!lt"nll1ent 'is .at t,~e bottom 'Of the ,economic'spectt'um: poor fa!~llljes8Ji'iId ·those joli'dl'lgthe sl,IIeUing rank.s of .the ul'lemplcy'ed who can l,east afford to

pay en extra Be cent's in tax on a $9,.99 pair of baby shoes. .

The proposed tax change.s aire part of an e:xtrao,rd'inary move by Premier Daltotl McGuintyto address: the province's s.tunnins reversal of fortu.ne.

oOfltclll"io offic.:ially beca~u1! a pobrcotlsit'l of Conhderatio'tl thi!ii y~ar ~ receiving p,ayments under the national e'qualizatlol'l I~.lro:.grflm f"O.r t~le fir~t time., and it: is nat at all cleslr' Wilether Canada" s most populous provin eEl'wlD eVE!'!" r's.claiIM its ~t,at us as t,he count ry "s economi,c

po~e't'holJ'5~..· ., _ .

Harmonization would help: the' tlilin~ provinc,e weatlher ther·ec€!:ssiol'll by ma,ldngbusinesses more competitive) because they could re'ce,iv'e a refundf·o,p ta>:es p·ai.d CliJili goods arn:d services and other purcha'sesbo run theirop€!'I"tltions. M,r. M:CGuinty wOl!llcf no,t conf'lrm yesterday that the re"folt"m is part of the: budget, but he acknowledged the toisks •.

q'I don!t,think we'v,e been put in government to. ChOOSA:!! what's easy;' he told reporters. ..

He. said 1,n January that he, 'was con:sidedn,g harmot11Hi.ng the t~'O taxes. Yesterday ~ ~o~.N~ver,J he said- the initiative 'could die unle5S~ the Harper govelrnment ,agree.s to dr-op the, GST from hou,sehold goods that are not cha,r·g,ed provincial sa'les taxes. Federal fill1Cl'f'lce ,Min:tster' J:i.,m

1

.Fla1herty has be'en urging Mr. McGuitity, to ha~r,tifloni~' the two 'taxes for mOire than ,a ye,ar. Thle Premier not,ed that when' three of the Atlantic prOv!inces harmonized their sales taxes with the GST ,back in" :1997 ~ at the urging, of f,orme,t' finance minister p.aul Mill<rtin., they receivll!d

compeln $,ation fl"'om the fede ral ,c'Ove.rnmE!'ot because their tax revenue s d'e,.:;:U n ed • .

"It I s 110t- the ki,nd of . tiling you would want to pursue unless at. the SfUl1e, time )lO,ll were ,going

to find a ~lay to p.rot,ect l'a,rnilies)" Mr. He:'Guinty_ said. -

The backlas h ha,s. a 1 ready hegun. ,_

The Build.ing Indus try a nd Land Devlelop,lltent As !iociation· rele,ased a study ,ea.rlier . tni s mm11th ~ showing that harrnonizaU,on would cost home buy.ers $2.,4-btil1,on more a year. Tax increases 011

_. new hOOle sal~'s W()uld range fl"OlIl $12,990 to more than$4qJ900.

1'1 .fear tile IWOf'5t~ ,; Stephen Dupuis ~ presfdent of the as sociat1on J said In ,i:I" inter'Vi,ew yeste,r4ay. "iWe' r,e the mO.st expen.sive thIng people buy, so the i,mpact is just huge,. Ii' Opp,osiU,on members ,also we1,g~ed in on hal"roollizatlol'1 yes:tef'da'y~. revealing: that the ,government

wi 11 fa ce opp.osl ticn from both s,ides of the' politi c_al ,sipe.c tr"I!J!'fI. '

"On 'the :surface, lim I riel' very ~ v,ery nervous about biringing ill harmoni.zcl'tion iii;!: t~e very time whel~1 t his provine e h really being fa ced with. challenging Umes," sat d Bob Runciman t' interim lea del'" ofl the Progf'\es: 51 VEl C.ofllsenr,8Iti ves .'

New De:rnoc:n~t "le,ader Andr,ea Hor~lath criticized harillohizat:ion" asa "regressive" SdlE!lll1e., "This is nothing but aSilles tax grab that will rd.ckel-and~dime f,amili,es th,at. e:fre alr.eady feeling

the squE!eze~" sh'e said. .

fil1ln PosclhmannJ, v:ic,e-president. of resea.rch at the CP. Howe Institl.lteJ said ,t~he f?iOV,errlHRent could ,Lntroch..lc,e llieaSUir"esfor coma:lmers; :il1lcludin,g ,rebates fOIt' llow~lil.c;::,ome families" to compensate the~1 for paying taxes on p,roGUcts, now exempt from provin.chl tax.

2

From: ~'ent: 1(:11:

Cc; Subj.sct:

Cole, :Eliz.abeth FIN:'EX .

'Wednesda¥1I March 251, 2009 9:44 AM .

Armstrong I Glim E ,fI_N:.EX; KendaU'~C.raden, Rena PAB-:EX Flanagan, P,au~ FI N: EX; hldrew r Marc FIN: EX

RE:: Globe al'ild mailc; on~ to hiiUlI'!O:n:ize?

V,es) this l.sthe f,inai d.raft.

- - -- -Original Message- - - --. ·From: Arrnlstrol1:S, Glen EFIN: E:X

Selnrt: WednesdaYi Mairch 25~ 2eeS! B:37 AM

To:· Kendall-(radell~, Re,r:1iiil PAlE! ~ EX .

cc :Col'e~· Elizabeth FIN ; EX; Flanagan~ ~,aul fUl: EX; Subj e,c::t: 'RlE: G] obe and rna il rcnt to ha.lrl1loni ze' r

_Thp mj ltbter I:lii.s.....a..MU11Lf.!...!· Ir._,Q""mlL_· _..,lc!'!!s.o!:st.:!o.· ....!w~@=.:.e~k!.!:. ',___l,i:fs:b,;. 1u3i....- __ ~~ __ ~ ~ .....

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~~~--------------------------------

- - ~ - -origina 1 Mess age ~ ~.~ - ~

r:rom .:' Kendall- Craden j Rena pAlB ~ EX

S~nt: lI1ednesdi;liy~ Mairei'D 2S,,20e9 .8 :1'9 AM

To: A~rnnrong,. Glen EFIN:EX; F1t!litu.igai'l~ Palul FIN:EX Cc = Ke'~st) GO'l"don PAR': EX

Subject: RE: Globe and llIail; ontto harmonize?

H~'y theF""e ~ is ·this, up to date? RKC = ~ -~ - Origin all. Mess age~ - ~ - ~ .

From: Arm.str.ong .. Glen E FlN:EX

Sent: Wedne.sday; March 25, 2.0698: ee 'AiM

·To: Kenda:U-Craden~ Rena PAB~EX; naJilagan~ lP'aul IFIN:EX Subj eCT: Re: Gl0 De and ma.:I.l: onr to h irnlonize ,.

- -, - - ~Of":!..8in1!l!l M<ess age,

from: KendaH-CradenJ.Rerla :PAB : II:: X

To: .Armstrong~Glen E iFIN: EX; nanagan~ pa,ul Fna:EX Cc: P'atterson~, Shell"ri PAB: lEX.; KeastJ, Go·rd1oifl PAS: EX Sent! Wed~a r .25 07: 56: 39 2909'

Subject: F\oJ! Globe and llill~d 1 : ent to h,armoniz,~?

He no. and good ll1orr'ling.

Is theri'.!lC! possibility we will g,et questions on harmonidng tax in ~OC?RI(C .

. McGuinty risks consumer b,i;i!!cklash· with move to harmonize !i,ales tax Glohe ·,and ,Mail Wednesday} . Hareh 2S~ zees Page A91 ;By Karen Howlett TORONTO BLENOING THiE TAX

.$46.) 676

1

".

The blended con.sumpt1.ofl t,i!IXrUnS the risk o'f 1,nfuriarting burdened. ,consumer's) as a $tu~y show,s the harmOllizEl,d system would add $46~ 676 t(l the purchase of a new home in Tor-ont;o"

*,"'*** "

The Ont ario g'twernme:nt 'L'liJl announce i.rn tornorroLlrl's budg'et that it will sign a tentati v,e i\'Ilccord 'with Ottawal to t1amonhe the province is ,8 pe'r cent ,prov'inoial sales tax with the S' per cent fe,(leral goods al'H~ serV'ic,es .tax, sources familiar with th~ documeJilt said.

The' ac cord J I'J fir.sit step in what 1.5 expe,cted' to be a lengthy I' roces so to reforltl the p rov! I1tlE! • s' sales tax, was; "!l/ei,comeo by busine,ss" but (:ould ,ang,e:r consuillers,' who w,olJlld e,nd up payinG a single') blended consumption tax of 13 p,~1:' cent.

Consumers fear that ta)Qes would ,iliH:r:ea,s,e on i:la,sic goods ,suchl as heating oil~ dliape'rs and ch:Hdr.!\lfl' s c1othing~ all of which are ,currently exempt from Ontario s,aliEls t,!;Ix. Under harmonization~ a new value~added tax wO!Jl~ ap,ply to all products cover,ed by the gCJ;Cld.s and'

s:ervUes tax.J and consuaer-s would see one charge on a salEHi receipt. , ,-

A harmonized system \,Jould add $41h 676 to the pupci11as,e of a new home in To'ronto~ according to

one study.'" ,

But the bl,lIIg:E!.st flirJli.ti.cal rIsk fOlt' the, gove,rmnent is ,at the bottom of the econosdc .'lOp',ectrl.llJl: poor famHie,s ,and·t:ho,se joining th,e ~~ellin,g ranks ef the unemployed rwho can le,ast afford to pay an extra sa cents in tax em "a $9.99 pair of baiby shoes,

The propos,ed tax chang,es,ai,re part of an extraordinary move by Premier'Dalton t4cGui,nty to

addroes.:5: the, p rovlfl,c e' s stunni n:{l r.eve.!'" oS al of fortu ne •. '

Ontario offi'(ially became, g poor cousfn of Confederatio'rl this yeitlPJ receIving payments under the national equalizgltion program for the first time~ and it is: not at aU d,ear illhetfie,t" Canada ,; S roost pOpUhlUS' provin,ce will ever reclaiill'l its status as the country' 5 ecol'!omi.c

powel"ihause. ,

Hanoonlzation would help the .ailing provirH::'fil we at hI;! I'" the recessionl by_ making businesses more cOO1Ij:II\ld tive,~ bec.aus·e th-ejl CGuld receive a re'fund for taxes paid on goods Md servi,ces and other' purchases to run their oper,;;J,t'io!11s. Mr,. Mc~uinty~ould hot confirm yes:terday that'the reform is .par-t of the budget, but he acknowledged the risks.

i'I don r t t 11.1 nk we' ve been put in government to choose tiih at's fmsy/' he told repof"telrs.

He said in January that he was consiciie:t"ing, harlllon1z!.ng the two t'ClXes· a, YEl'-st@rday~ hO\'l,l'ever~ he 'sed,a the inlt,iative could die unless t.he Harpelif' government agrees to drop the GST tif'Ci!lI household goods that ~lre not ,charged pf'ltnvincial sales taxes , Federal Financ;:e Minister Jim Fla'helf'''ty has been urging Mr. McGlJ.inty to harmon1.z:e' the' TWOI tax-es felt" more than a year. li1e Premier noted that IlIhen three of "the AtlantiC ,Jwolv!m:es harmonized' their sales. taxies with tile GST back 1111 199'7 ~ ,at the ur'g.ing offoil"mer finance min.:istel" Paul Mart!n, they r.e.ceiv-ed., (omp@nsationfrQm the fede 1"i1! 1 gove rrin:Jetlt be ca Us e tih d r tax ,reVEl f1LIii;S de,dilllEld.

'!It' s not the kind of thing you would want to purSUIE! unles.s at the s~me time' yO-I;.J' wer'e going to fit nd a hi'ay to prot'ect fard lies ~ n MIt'-, McGui nty satd. .

The ba,ck]ash has al~O!ady begun, -

The Building Industry and land Development AssodaU"m l"Ieleased a study earlier this li\1onth~ sf1o~~ing that harrnon;1.;!lation would cost home buyer-s $2.4-billiol1 more ,a year. Tax inCireases on new home sales w'ould rarilge f:r·olJ'il $l.2,jeee to- more than $46~aae.

"I fear the w,o.rst,~! St,e.phen Dupl,li.!i, p'resi<l'ant of the assecfatdon, sa.id in an interview yesterday. "We're the most expensiVE th::!.ng people buy" so the impact is jus.f huge. n Opposit.ion members also ~,ei,ghed in 101'1 haprIlol!'lizati,o'n 'yesterdllY ~ reveaHng- tihat _the governmet:l't win face opposition from both sides of the pol:1tlc.al spe,ctrum.

"On ,the slJlr"face11WE!' re v'ery J very 1'iIi'il('VOUS about bringing in MrnlOnh~ti(l'l"l' at the' v@rytime, when this p~oviJ1ce is really bedng faced wi ttl challLenging ti!Ne·s~" satd Bob :Ruflcimfln~ interim

leader of the Proglr,iessive Conser.vatives.' . , '

N'f!w Periioera't leader tilt] d rea HlO r"wath crt Uclzed he rmoniz,ation as a "reg,ressi ve" sc heme. "lb1$. is noth.tng but a sales tax~ grab that ~'~11 nickel-tmd-dllne f~lJlinies t!i.~rt ,are ,!'lllre,ady f,eeling

the squeeze," she said. , ,

Finn poschmann~ vi.ce~president ·of .l"'e.s~a;li"ch at the c. D. HOWE! Institute... said the government could i nt 1"'0 diu ce, me~SlJres. +er cons UHlers ) includ:l. n'g re bates for lOIl'll-incpme families., to camp·ensate. them f,or paying. tcl!)u~son prodll!,.lcts now' exempt from provinchl ta)(.

.o,ole., EUzabeth FIN:EX

From:

Sent:

To,: - Cc:

Subject:

Attachments:

~t!tached the harmoJ'lizatlpn BN Wt:_:I.:'!::us:::....:3==-., .::.Ja 1:..1' ===-::;:~-=::.:~QLbi.es,p.QRSJl'l!IL _J

~o~o_·~ ~ ~

---.~--~. -~~-.--.--

~-------.- .. -~-- -- .. -~--. ~ .. -

~ro.m.: Armstrong, G:I@n E FIN: EX

Sent~ FridaiY, r-'arch 27, 2009 12:17 PM .

To: CoJe, E:lizabeth AN: EX .

. Cc~ AOOJlewj Marc RN~EX

Subject; FW: A.ppa.rentry Ontari:o has confl.rmed end prov1ided some detaJ15,

He·tn. please email t.he harmonl2:atiol'l note aodl

. '~n~~~~ ~

-_".'~ .. "-~ .. --.- .......... ,.:- .. ----~-.---.- ..... -.---~------------ ..... ~- ---~- -.-.~--.-,""""",--"'''--.~ .. -- _.,' .......

, .

F'r-om: Andrew, Marc F]N.:EX sent: Frrday,!Match 27, 2009' 10;50 -AM

To~ Armstrong, Gren E FIN: E)C

Subject; RiE: ApIJ'arently Ontario has confirmed and p:rovlded some detalis

from: Armstrong, Glen E FiN.:.EX

Sent,: Ttl ursdaYt Mf!rOh 26, '21009 3: 12 ·AM

io: AndreWi Marc FJN.: EX . .

SUbj-ect: Fw: Apparently OntalilQ has Qont1rmed and provi_ded som~ detl:lils' I.mIPorta.l1ce; High

from: COle, Elizabeth AN:EX

To: Armstrong, Glen E F1N'::,EX Sent: Wed Mar 25 19: 13':"2:7 20(19

Subject: Apparently Ontiu/fa has oOlifirmed and provided some details

http;U~.tneglQbeandrrU\n.comlservleti[toaIRTGANf.2;(10903.25.wPOLontbudge~Q325IBNStOl'Ylpoliticslhom .@

1

.ontario wiU exempt. some goods from h.armollized tax KAREN HOWLE'IT and BRIAN .LAGHl

From ThTUfsday"S Globe and Mail'

March 25; 2009 at :I 0:00 PM EDT

TORONTO - The Ontario go'Ve:tnmtent has moved to douse a flrestorm of criticism over its.pl,ans to reform the provincial sales tax by exempting a number of basic goo,(i's) :including ch:ildr:~~Jts, ,cloth.inJ~ di:aper,sand new, homeseosting less th~n $400,O:CN)" The government also proposes to .help consumers adjust to the new regime by providlngone-timecompensatio,n of.$l,OOO - in tm-ee equel payments over 12 months ... to families witl~ .almual ineornes of less than $160,000. Governmenrsources confirmed last night that todais .budget will inclt;tde plans to harmonize the 8-per .. cenrprovinoisi sales tax. with the S -per-cent federal goods and services: tax, The sourees also confirmed that the government is taking the sting out ,ofbmmo.l'Nzation .for consumers by erxempting from the new blended sales tux many bousehold goods tha.t ru'e llQt currenrly subject to pl'ov.iincial sales taxes.

However, not everyone is bappy. New]y built homes thst eest more thall $400,000 will be hit with. higher taxes - as much as $46,676 in T01'Ont~ according to one study _, whHe the federal gover:runent has agreed to drop, 'the GST fur those under that threshold. Closing costs on an homes, including, realtor fees" legal services alld horne Inspections, wUJ climb because they are not currently subject toprqvincial sales taxes, The Toronto Rea] Estate Bosrd estimates that wiD add $2,037 to the purchase' of a $360~ClO{) horne,

'TREB spekesman Von Palmer called tt a "double whammy" fer Toronto; which intreduced a ,]anq, transfe,r tax

Jest )'lear. . '

~~W~'!r-e shocked at this. Welre still reeling from the laud transfer tax," he said, '~I think tbe last tiring the home mat:ket needs r1ght now Is increased taxes on homes."

Premier Dalton McGuintyls gevernment bas been under siege over its plans tointrodace tax reforms as part of a 'broader initialive to belp the -province's ailing economy, Constituents na:VI(l' flood·ed then'1\1PPftwnstituency offices wuh telephone calls, exp.re~~ fem:stha.t taxes would Increase on basic goods thatare currently exempt from Ontario sales tax. And opposition members have .seized 011 harmorniwtion as a newIJpporr:unity to label

Mr. McGuinty a 'tux~la.isiug promise breaker..' '

In. faclf" any doubt that the provIncial budget will be deli'l,..:ercd in an atmosphere of crisis and intense ,scmtiny was-dispelled yesterday. when Finance Z1mnister O,vight Duncan trod on tradition, He did not buy a newpair (If

shoes for presenting tne,budget, nor did. he hold. t~e usual pre-budget photo-op. .

Mr. McOuinty h~ said his government would not pursue ha:lm~oojzatlon.U]tless the Harper government agreed to drop the goods and services tax. from household goods or provide cempensation in the form of rebates f-or

low-income ibQusel101ds, ' .

~~We;tre going to have, a budget that protects familie.sand strengthensllie economy," he told reporters yesterday ~~ . .

WIth the help of the federal government, it appears that 1\.11', McGulnty wiU be able to make good on tbat pledge" The federal government has agreed to exempt basic goods from the GST., The de~ will also deliver 'multibillion dollars in: cerupensetion to' Ontario, said SOUl'Ces faniiliaI with the tentative accord signed by the two governments.

The compensation wiU be similar to what three of the Afianticprovinces, received when th,ey harmonized their taxes in 1997. The. former Liberal government paid N ewfoundlandand Labrador! Nova Scotia and New Brunswick $961 -millien,

A source also, told The Globeand Man. that the government would put the Mended tax: ~n p~ace before W.e 20.ll provincial election, Businesses nave been pushing fOI harmonization because it win make them more competitive by reducing their eosts. They could receivea refund for taxes patd on goods and services to run their operattons.

The federal government also plans to b.rin,g a. bin to Padiamen~ for ap'Prova]~ which could well be hicky fOof the federal Liberal s, Voting far the blended tax might jeopardize federal Liberal popularity in the p:mvince~ where it bopes to make larg,e gains in the next election. By tile same token, voting against the propo,sal could create tension. between the federal and provincial wings, Liberal Leader Michaellgnatieff has forged substantia] ties with members, of Mr. McGuin'tis government.

The payoff for the fedemlgovermnent comes in. the ba.ckin_g .il gives Finance Miwllster Jim Flaherty as he presses other provinces to adepta blended tax, something the government has been seeking since its. election In 2006; British Coh;nubi.a, Saskatchewan, l\r1a1l!i'toba and Prinee Edward ~gbmd hav,e all resisted harmonization. A[berta has no provincia] sates: taxes,

Mr. Flaherty was tight-lipped about tbe harmonization idea yesterday. The minister, who has been crltieized for saying the province was not a good place to invest, was, asked i"f he now thinks the opposite.

~~rfYou would' like [10 ask Inc that question nft,e:r they publish their budget," be said, !"I1d love to answer It.'

Mr. Palmer of the- TREB sald the sa]es tax barmonization will ,disproportionately affect Toronto> where new detached homes seldom sell for under $400,000. It was unclear how the tax would be applied - U: for instance; onthe sale of a new $5GO,O,oCl home, the harmonized tax would apply to the .fu.n price, or onJy the $l 00,000 thnt exceeds the threshold.

If it applies to the fun price, Pvf:r.Paimer said one could expect a surge in listings for $399~999 to avoid the new

tax, .

(CHow will tha,t distort the marketplace? People will realize thatrs the threshold •. " he said,

Mr. Palmer cited a study estimati ng the harmonized tax wil [ raise ,$31 J~mUHon rO.f tbe province in taxes on the dosing costs of home sales alone.

From:

Sent:

TOi Cle:

Subject:

AfIdrew, Marc FIN:,!:X

Frrdiay, Marchi 20, 2009 3:51 PM Armstrong, Glen E FIN:EX Gale~ E~izabethFIN :EX

IRe: Revenlile contract

Tl1anks~or ~hls.

F'r-om: AJrmstronQJ' Gr,en E FIN: EX To: Andrew, IMarc AN:EX

Cc: Cole} Eltzabeth FlN:E<

Sent:: frl Nair 2C1 15:01:012009 Subject: fVV,: Revenue contract

~re: Betn j'U5t poinfeciouf ,a &ign~fk:a:nt typo 1., my amant [:.3 , J

~j,3 1 ,------------~

_ .sony about tll1at

Marc: we recently se,ll'It up a IBriefing Note paek~ga to the ,Mlnllstef 0 III harmordzatron fulf inrormatf:on. D10ug Fos~r has ~een~oing ~ome wp-dulhlheLcrmtrj_ctB.e_~__aormertv SBRJ has wTth EDS to help cotiect debts owed to the provinoo.

r-~~d~J' .

~ta..s.l:l,---' ~ ~ _j

Chee,r'S

Gl.en Armstrong AlADM

Sirategic and Co,rpo,r,;grte Pol~cy D[vis,iion Ministry of Finance

(i5'O) 3B:7 ~9011

Fi3!J(: _ 387-9001

glen tarmsJtrotlg@mv.·bct9lJ

fnlm~ Arms.l:rof!lg, Glen E f!N:e< Sent~: fnlday, Ma-tdJ 20, 2000 2::39' Pl~1

To: IWlrew,. r-tlrc FIN~ID(

SlIbje!:t: !"Wi Revernm co.nbaot

Marc: vre reOOriitly sent lIlP a ,8ri'r;!fJI1:9 Note pa ckage to file M 1nismr on harmonization for information. Doug Foster has been .doin9. .S. 0 .... me W ... f" ... ir_ord. lelA _c.nnlracl..ReMe:nIJAHono.erllLSS.B, oas_wjfu__J: DS to help Q911,ect debts owed to the P-fO!!r:J;ce',

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1

Cheers

G,ren Armstrong AlADM .

Strateg,lc and Corpora:te porlcy DIIlf:Sion M~nilStIy of Finance

('250) 387 ~~;lC111

Fax: 381·9061

glfit1'l.arms;trongAooy;, be. Cia!

From~ Aml:!!IJ'OIig; GIe1l E NtiI: I;,X Sent: Friday. M',!!Jdi ::im, 20i1t9 2:24 PM To; Cole:, flrzabeeh fliN:,~

Cc 1'1i111i19aR. ?aUl FINi:EX

[Sll:lbj'ect: F\.\!'t ~evrml,le GOOtraa

Lv._, __ ~ ~-'

Gr~iIl Armstrong AJADM -

StratElg1csnd Oorpo{f;8ite Polley Div!sJon Minis,try' of Finance'

(2BO) 387~9011

Fax: 387..fJ061 g!eo.armsfJona@qov,oo;'Cl8

ft;QM:' F~I DiaHfiI fffl:IEX

SM,t: il"hl.ll'!lday, M~rdl19, 2G1® :8:35 AM

To: AlmsIll'OOg, Glen E ,f'iJ!l; EX

SUbject R!E: RIWefiIJe. Q1Il'Ittact

~ ----~---------------------------- -

!s.tl,..S_1Z:___~~ I

frOnl': Ai'lT~trong, GI~!iI E: fJH:,EX

Se:nt~ Woon~a)', Marcli 18, 2@ 2:58 PH,

1i~: f;o5te;r, D<ltig AN:!!>: .

Subjed:= Revenu€!: cOTIlr.ict

lhanks

Glen Armstrong AlAOM

stril!rteg~ea.J'ld Co~orate Policy .DIvision

MlnJstry of Ff\l'iN:lnce .

(250) 387,·0011

Fa>:: 367~906,1 ;glen.aH].siror)g@9Qy,llsca

'r

Cole, Elizabeth FtN:EX

From:

Sent:

To:

Cc:

SubJect.:

Armstrong, Glen E FIN:EX T:hur'Sda)'t March .26, 2009 9:01 AM

Flanagan, Paul,FIN:EX; Cole, ,EI12albeth FIN:EX GoSSi" Jordan T FrtotEX

FW; Ol"!mrlo Budget

~J~~6~ ~

She wm arrange a call with us ~o.r tomorrow irwe w,ant or-need da,nfficaHon. I'm ~n MFEX aH moming tomorrow so if we think w1e need a meeting W~' can decide this afternlo,on.

Cheers

From: Armstrong, Glen E fliN:EX

Sent: TIlIJl'Sd1lly,Mar:ch 26, ,2009.8:43 AM 1'0: 'Loui5e.Levonian@fin.gc.cal~

Subjed~ Ontarilo Budget

Louise:.~ ....... ~~ __ ~~ __ ~~~_~ ~ ~ __ ~~_~ ~ __ ~

[_13'~ ___j

Thanks

1

From:

Sent~ To; SubJecU

ikoulse.ke

lhursdaYt . 6:10 PM

Arm6~rong" Glen E F~N':EX

F!i~.: Olt!ario Budget

J

~~.--~----~--~------------~---~------__j

l.OU~r1I Lemnrrsl'l

NA~l$r~l'Il Ol!pUly Mtf)riStar i SQl;!s.mf.nl&tooa$lnl par fnt6r,im

Tax poJicyBmnch I :DiJn:lcUotrl de la polililq,ua de i'lmpot !)e~art_menl olf PJna'FIQe Canada ~ fil~:rnlS!t~r& des Flhs!ncelS Canada ottawa, Canada KiA OG5

:Lc,UII'sa..Lavonfa(l@fll!it.g.C.,lca .

Te~eplWmlelnl~~phQne G13-S92"~EiaO I Facsim1i1;l1 reIOOopJ0ur61:3"00~(Ie60 / ''fetEltyp~'{rlte,r l rtllelmpfifl:leur€l1a-l995~ 1466

Government Q~ Callada I Go~emement dO' Canada

Canad!i

Fmm = Armstl'Olilg, Glen E :FJ,N~EX [maUw:G.i.el'l.Al1'Il<Sl'roI1g@QolII.bC: •. c-a] Sei1:l~ March 2t!v 20097:1.0 PM

To: levo!1lfaltl" Lo:ulse

Subject~ RE:Onta~ro lJiudget.

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[-S,_U,_S.j6.__ __ J Ma ny tha nks.

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'From = loulse.l..evon!a:n@fln.gc.ea ![mail:ro:LQu(SE!.Lev(J;J:l~an@nn.gt ... ca] gent~, Tthumday, Man;h 26:, 20093:17 ,PM

TtI~ nd!bl!ln'u;i@goy,pe,ca; heather.wooc!@gov.mb"ce~ ~nnagregor@fjnaimoo.gov.:sk.cat Arli:lJstrong, Gren E F1N:EX Cc~ Ste.pnen,Watson@gov.mb,c.1l; asrlnWtls@nnance.gov • .slk.GMFlanagall1'l PaUli' FIN~EX; N!aniCY.Horsm~n@fin.gclca; IB.rlan.E~we~n@JfnigCMl; U~e.PoMn@f1I'1 .. gc.cai Ke1.Momy@fln.gc.ca; franc:!t'te •. Nofjbl~@f]rI.Qt.ca; Bilil,OMndler@n!).g:c.ca: Peter.1\f.rJ\I3r@fin.gc.ca

Subje!clI:; Onl'ii!,r!o Budget

Ai you may be awaffl,i• the On!arlo Bl.ldslet ~ab~ed today Includes an :ann'OuIlOOrnElint of the province,I,s: IrwlElnt ro '9Hrnfnal.e ~ts retalisaJes, hlxail1d jdJIn a moderniZed .harmonlzed salJ1l!s tax f:ramework. f,or your inrormatron, laIn atlic~lng a ,oopy of ith6: Memor:anaum ()f Ag~e~mint b.et'iNeen Oanada atlLd Ontarfo ~n tMsregard.. lati1 aVlffiUabie to di~Q!..U;J:s.

1

,

Oepartment of Finane'S Oanada J Mlnlstere des FJnanoes Canada

Telep'no'lle{ T~I~phone61S~9$i2-1630.l FaosimUe I T£irOOOp!eur 61;3-SrSe..(J6S0 I Teletypew,riter I T:~I~rmpr.lmeu.r61a.995-

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Memorandum of Agreem,ent Co'ncerning a' Canada-Ont'ario .

Comp~ehe,ns,ive Inte·grated Tax Co-ordinati,on Agre1ement

Con fidie,n:tia I IMarc:h 200·9

,Miem,ora ndum of Agreement Concarll1lhill ,I Canada..Qntario , Comprehensfve ~n!tegrated 1ax. ,Co .. ordfnahn Ag:raement

BE1WEEN:

The G,ovemment ofCslnada (refOOfJid te: as "Canadal), ,ars repl'lueoted by the M'.~nfsle.r of

Finance of Canad'a: .

AND:

The Government of ontario. (referred to 8a "Ontario·), 88 re,pres6l11lted bylhe Mfnf,eter of ,Ffnanoe of Ontario;

Pream~

Thls Memorandum of Agreement. rMOA") reHects the slrong eommUment by Canada and Onlarfo to wo:fkco.llaboratlve[y tobuUd a stronger eoonomIc fOl1ndafloln.

,Pursuant b)'fhis MOAt both ,part!es commit ,to using their best efforts to ne.goUate.a inew Canada-ontario Comp,ll!honsJva l'nteOir&ted TalC IOD-erdl~stlon Agreement '(h€Ul1!'after Ireferr:ed '[0 ,&is the NCanad;..Omario CJTCA ~), togefher wUh any neQ&S.ssry related aares'ments, whereby the CanaO'sl RQvsn ue Agency (·CRA~) and' the 'Canaoa BO.l'dier Service!s Ag,enc,y ("C,E!:SA:"l wilIJ ,Bdmf,niste.r an Ontario VahJle~Added Tax rOVAT")I.,

This MOA fOmis, the framework for concluding ~he Canads-Ontaric C,ITCA.

Canada·OntarlQ Comprenensfve lot,egrated. Tax Cc"'ord1mlnon AgrE!,ement

Canada and Ontarioa.:gree 10 mS.ka their !best efforts tofulfUJ th e undertakings set out it! this MOA ,In order'tliat aU polley and administrative damns are finalized; lneIudilngl SiAY necessa.ry i1egrsJative' r;»'OCesse's and. the sis'n:ing o,f approprlate agreem:s'J"lts, before Ms'rch 31; 2010, ,except, where otherWIse specified in thts MOA.

Ca_nada ur)Ci,er(akes to ,see.k the appro\!a~ of the ,Governor ~n CouncIl to enter into an agreement ·under Part 111.1 oflhe Fedaral-Provlncls' Fiscal Arrangements' Act' conSistent wUn the'terms of rhm MOA. The ,partIes understand that this MOA, does nDt oonstiru~e, an agreeMent pursuant to sllbsecHon 8.3(1)1 of 'the Federal-Provlncfal.Flscsl An:srJgemanl.s .Act.

SubJeotto both Parties hsVing srg.nlsd the Canada-Q;ntario CiITCA, ,and subject tel' Ilegis,l.aUveapproval" t'ne Parties will' work toward ~he imposition, of Q1:e proposed OVAT by the CFWce:SA or; July " 2010. Subject tolhile' approvaw, the C FYVC,e,SA wjI~ have the nece.ssary sys~ems in place to effectIvely imp'iement the OVAT 0111 Jiullf 1 ~ 2010.

_ . _

.

Ontario undertakes to see k a:uthcrltyto ,enfe,r into Ins CanadaoOntarjo CirCA.

Can ada and O!1lta~o will u.se tt1efr best efll'orts to eon dude 'the 'Canada-Gntarlc CI'TCA within six months, of having signed '~hls MOA.

ImRlemenmt~'m Dafe

,Confidentiair - CSl"Isda-Ol1tarto Me'niOJSndulM of Agl'l!ement

~edeml' IranS'fflona,1 Ass[sJanAA to Ontitl9

"1'0 he;Jp offsetlhe IraniSnlan costs .sociat:edwJth the Jn1\pfem9nta;fl'on. of tie OVAl and 'the wInding down 0" the ,re~iI sales tax admi:nistl'8tlon In' OntariO' end be'CSilJse lmcvfng to, an OVAT wOIU~d support ecanomic g'tollVth and job creation!, Canada 'Wiflmake two trslnsfer paymentstGtaling $4,300 mrlllD,n tioOntarllo. The, schedule of transfer ipa,~menfs wiJ!llbe as follows: $3,'000 m.lllion lupon tile date of Imposiffol'il of the OVAl and ,$1,,300 mNII,o:n one year following the' dale of irnFlOSW,on ,of 'hel OVAT provided the tax contfnUH, 'to be lin ptace ,one year after the date of Imposmon of U1e OVAl.

Onlal'llo ,agme5 Ie remal'MJ a peny' to the Canads-Ontafio CITCA for a ,cellad of at lent five years ft1)I,lowing ImpositIon.

Onta'Ffo 'Value-Added Tax

An ,6% OVAT WOUld be .Imp:lelmen~ed under the hul,lral Ex-eise tax Act. OntarIo wiD !"repose ie,gislatfonto give· effect t'D,the Canada-Ontarllo C~TCA I.!nd ,allY llfher ;'J'fO\iinclaUy admlniMered measu,ressppf:opriate to the trans[tlon to the OVAT. '

The OVAT waLl'rti have the 6E1me tax basreS/s the 'Gooa's,snd S,ery,ices, Tax (GST}. subjeot to the exoe'pti'ons descrfbed below.

Increase, orciecre:ase, flhe OVAl rate ·B:fter two y.ears fromrthe date of

OVAl Implem,entation; "

- de'slgmllte II fimited number of OVATjJoint-of-safe rebate;, not exceed!ng5%; in aggregate, of' 'the 19s,timated GST base for Ontario sUbJ:ect bl data avallabltlty Slid deflnlUoDS used In ,the CanadIan System of National Aoocn;rnts OJ' other mutllJaUy agreed upon data souroes~ definllons and methcdoJogle.s,.For greater !Certainty~ poi'nf-of...sale rebates 'that Canada ag,reesto ed'mfnlster for O'tltal'io wm inclUde children's ckifrli'n,g" tem,inlne hyglrene· produots and books;

~tem,porartly deny for a ,perlod ,of up to five yearss. poJ"Uo,nt, IUp'to 1 OOO~, of a~rcwabre, business ,!n,put tax ,oredits eITCs~)' bas'ed ,on' a sered Ilist of Items to be d'eterm~nied by O,ntarlo ,(not to is:PPlY' beyend the i'terns subject to tile Cf,J'rrent ITes denials undlsr the 'Q,usbecSa:!es Tax). F'olfo'WiI'IQ' thli period, fulllTes willi be phased~in, In equal annual' propol'i!:lons ~ o""er a :perfoCii of up to three years" Onterio, would s,c'van:ce the,Umeline for the. ph.a,se-:rn ,of ftln ITCa should fi&ca I clrcumstanoes allow; and.

set OVAT rebate rates Sind thresholds for Munic1pelities, UnlversUles, Scho,ols, Cofleg,s'S a,nd Hos.pitaJs (MUSH)., Charities, qU8,IUyI1ng NPOs and New lHous,hlg1. s.ubJeet to m:atching othier federal' GST admlnistratJv,. and structurall para.meters.

Canada aglrees to Introduce legIslation t:oenrsble the t'ax: rPQ,fWy flexlb~lIty noted herem,

Er:ov:!ncia:! IaxPo,Hcy FI'exJbili!y

The Canada .. Ontari'o C~TCA wm 'confirm OntarIo!s flexibilitYt subject to reasol'l,abre notice provisions", to:

QQmmO'D Tax Elasa

Exoept 8.S, provided In Ilis MQA und8rfhe tts$dljng' Provincial Tax Polley Fht)dibility; Ontario 'will enter (nto the Oanadar-Ontario CIT-cA andwm be bound b.lt tal)( base changes; made by Canada w;rth respect 'to 'the GST. However, \Willie, 'Canada proposes, a tax base Ohi:H'I,ge tha! wouldre,lIull in a r;eduction of more than ,Dna percent of OVAl ,revenues (net, of provinoJaf rebate,s provided for W1derthfs MaA, Bnid JTCs)" Canada: may fm,plement the e,h,ange, only ,If the Mlnl$1etof ,Flna'nce ·of Ontaltf:o prtlvld'es wriHsl'iI agreement to the change prior h) ilmp,femen:taUo,", If Canisda Implements the tax base change wJth,yW .conSJl..ltttng Ontario. or ,proceeds wffhoul: Q,li1itaJiiJ'ol,s wril.ten agreement,Canada, slllre.es tc ~t.dIIIY compe,nsate Ontario for the reve:n:ue re.cfuctlon for 'ev,e'ry year that the-change remail'l's In pla:ce ,ana the Canada~O.ntariD (iITCA remslins: in foroe.

'CStRade anal Ontariawilt d.&v~op reasonable .noltce prov,f,sh::ms in the Caliad.Onmrio CIrCA.

Co,Mictign and Administrsti,on

The OVAT. Including all elJgrtde rebates and temJ)Orallily Ki'sttfeted rrcs J;lrovlded for I,n this MOA under the headflng P,lIovlnc!a.1 Tax.lPmlcy Flexibility, will be ,collected and administe,red, Sit mutuall'y agreed upon service and oompllanoo fevels! bV the OFWCBSA at no charge te Onta'flle. In addiUon. Cam!l:C:EI wJU be ·sole.I,Y responsible fClr aU CRAICSiA stsnup and ongoing costs. inc1udlngtheir deveJopmlen~ and systems ,costs. '

For Q1teat&r clarity, these coses will not reduce or ,be ,offset, aga,~nstthe $.4!300 million in total transrer paymenfs pnJvided for In fhis MOA under the heading F&derlll Transmons.1 Assistance to Onta!rlo.

Canada agrees to pay Ontario wts reve.nue en~ij!&menls on a dafry basis. For greater ,damy" 1he al'ooaHcn fOr a tax enuttlement year Will be paid to Ontano in esti'mtal:ed dally amo'unt·s determined IJSmg the reve:!'!Iiue al!otanon framewor.k beglinniniQ Jury 1., 2010. The JJsYrTil12ni's wm ibe baisad on the estimate forUi.e taxentiUemant yeart and witl kloludaad,justments to these amounts r~datjng io acnedu'ed revisi,ons imd r:ecCinaliatf..cms as :provided ~Clr under the reVEnue aUocaUon framewori<.

PaYment of Revenues Coltected

Ca,nada and Ontario agree ·tha1 revenues payable ttl, Ontario will be bas.sd on the revenue aliocaUon fr:amewomas set: eut under ,the Canade-On~arf.o CITC~ subjeH;t toth,8, fOlrow~ng:

The re,venulElalliocation Irs mewo:rk to be inCifuded' in the Cana'da-On~s;rio C~TCA wl.ll be based' on t,he framework .10 the OrreA betw&en 'Canada and the, HST prwmces .

. Exc.bange of)nfonna~!on 8nd_ OH1erAaf'i8:8lOOems

There WjU ibe fuJ,~ C(HlperaU,on behvean Canada and On!arlo with respect to too exchange of h1fOrfnatf:an rer.at~ng to the OVAT. The :spedRe terms on ,infonnaUon exdnan,ge. and . mutualsssfatance w;1I .be p.rovlded fOr in agreem en,ts t·.o .be' ,entered ,Into between Cau1adal and' Ontario· (e.g .• the eRA and Ontaoo' and the OSSA and Or:ltarlo). Such s'greemlents wUl ens,ure the timely pn:lvlsion of avallillible OVAT specific d.ata and either OVAT..,re!·aled

- .

Confid:el'l,tiai - Canada-Ontalfo Memorandum of Agreement

information to Onmrloj as may be dJscl'osed pursuant to the ,appropriate laws and

reglJ,~tions. ~ -

Canada and Ontario wfa walk to' estabtish ,mechan.lsm(s)/ag.reement(s) to pKi\lldie for the .management ,of 11;S51JeS ;relat,~d te' cr.rellit:servlces, oCl,mpUanee ,Emd &nforoement of the ,OVAT by the CRAJCElSA.

Best efforts wm be made to ccrtcl:u:cfe these Bgreements tin aUmef'ra'me that lis ,consrsfent w}tl1j. and ,na Ister than, fhe ta'rget date for Ihe ,conc.UJsicn of ~he canada-Ontario C.ITCA noted earjlier.

IHumanlReaOlJJrce§

Canada and ontario, acknowJedge fhat they each must consfder relevant 'qislaUo.n and 1l01,~otesi,snd' have ccttective agreement MUgaftons with thefr respecfwe .baigaining agenls. Wifhln fhis context, the Partr:es agree to negotiate the best possfble arrangements r to be conta~,ned wj~hfn a Humanl ReSOOf('.eS Agr,semenllfor em~oyment at CRAlC8SA within Ontarl0. mOntarlo Public Service, e.mployees ,affected by Ills MOA

CRA. AdmrnisfratiOO of QVAT lin QntBlrig

Given 'fhe alg,n ffieant presence of 'CRAlCElSA acUvttv ,and operations in ;Ontario. and the pr:evious CraUlSi8 per1alni'nglc Human ReSOLJIrces, Canada wlill maximize fill! amount of aelMties and o'peraUons <;arried en in Ontario for OVAT.

Where it osn be demonstra1ec, w1th resped: w ,specific OVAl ac1iv'm'es· and ,operations, that the effective admlnistratkm of OV AT wowd be JeopardIzed lit ,the ,activities and ,operations are performed In Cll'ltarw" 'Canada wUl use Ibest efforts to maxImlH empJo,ymeMit cpportun [tll'es In 'Ontario far a corlresponcfJinQ number·of Oflfaria emlPJoyees ,affected byfhis initiatlve~ within dSlpari:ments or eg8n oIes of the fedlerall goy,errnment.

TheOnta rfO MInister of Finisnee may designate a person to examine such boo,ks ,and records. e,xcludfng ~rlfo,rmaUon Whi~c:h ;~ prOtected by Jaw, as ma,V be' relslI,& nt ,in c'mer to permit such person to, "epart In J'i8'Speet of the payments mad", to 'Ontario under the Oan,ada~Onta.rio CrrCA..

CO.mldentlaf - Catlada~!ltario Memorandum of AglreElili'inEl:nt

4

ApoointmeJnl of pgl1sJ

Csnadaa.nd On~aria agree to ~olntly appoinf' ,aPa;nel or Indiv.idual, wlthlln B months 'fol.lo-,.vIng th.e implemenmtlon of' {he OVAT, t¢, review and make recommendations on ~Cl5'sible Improvements to the: .

aaministr&tive EU11(i policy lnformsflon available on thle OVAT; revenue alrocation framewoll'k~ such ,as, replacem.ent b·y a s)lfitern that would provide 'the dis·trfbutloll of r:e,yenue to 'Ontano~ and Harmonized Sales Tax provlnoss:, basled on act'ljial s&i1esofgoods and ,services In such provl'nces; slind

,_ gov;sm.ance, and org's:liI.izaiional strucfures, oUhev,arious commltl:ees under the C:anadla!..Ontarlo CITCA.

-~-~-~--------- --- --

'The PaneJ orlndMduar 'wtll report Ibeck to' the partIes withln ,Oil'll!! year of being sppo.lmed.

Canada and Omatio agfte to consider revi'slngthe Canada"'Ontario CITCA IS appropri'ete to ;f'eft'ectti1e.reoommendatians ,of the Paner or rndlvldual. Canada will ,co:nsurt w~Ulthe exlstJing' lH'annonJzed Sal'es Tax p:rov,[m:es.

Om·a!ill RetaJJ Sales Tax

.ontario wm be' fesponsJb!e far wInding down its retail safes, tat to the exteiJi'lt~halt It: Is te, be rep faced by Hle OVAT.

CRAIC,BSA and Ontarj'o wm have the option of agreeing on the' CRNC.BSA PfQltI!djn,g cUent serV'l:oos, ,colrecth;l nSf audit liuJingsi objections and ."peal aotivmes Ini resped of the re1a,j~ sailes taxDn an ,lncremental'l ree' for servOOe basis O\I;e~rthe ksnslUon per,lod.

ConsHtJptiuna! JUli!.dictlon Not Waived

Neither Canada nor Onts'I'lo shall be deemed to have surrenider:ed or abandoned any at Its lpowers, rIghts, prMleg,e,s or .autho1'lUes und,iM' the ConstltlJtlon A.dS, 1M;7~1982, and any amendms'.nts there·to, or Qthel'iN~se., or to have im:pafredany su'ch POMl$, ,rights,

privileges, orautherilles. . -

CcnQMmialf1v

Pending a public: anl1cl1nc:emen~ by OiJtario ~hat. It Is introducIng an OVAT, CaMds commits to taking a II st;eps to embargo, UU! el<i's,tenee of tllis MOA a,nd to rwf ,d~:sc!:ose ,in any way federal~proVincla' dlsoussions relating to the cievefo\pment', n:e,goliafion s,nd ex.,c:utfon of thlis MOlA. Dr to, an OVAT .. The Parties agtee not tOI dis,closethJS MOA. unless mlJ~ually ,ag reed to, in wrW,l11g or required by '.aw:.

THIS MEMORANDUM OF AGIREEME:NT ENTEREIlliNl0 ON'.:

,. .F1ahe.rty

~ -

The HcnolJrable OINight Duncan Minister of' ,Finan,ce

Cole", Elizabeth FIN':EX

From:' sent:

To:

SubJ'ect:'

Goss. Jonjan T FI N: EX

Friday, March 27.2009 9:09 AM

Armstr.ong~ GJell E F1N:EX; FIN sep' falX Policy Branch R E: grobeandmail,oom News, U "date

~ c~'eat-ed a folder in the Harmcnlzatlon folder called ontarto Harm ~nformaUon. r saved the MOU tfii,ere and a document with the relevant comments from the glebeand maiJ'artfde. As more comes out from the, Ontario move, we' can add it here so that everyone can flnd ;it easUy If needled.

JOlld.a n GO&5;

Marnage:r, Coosumption Tax Tax FaHcy Braoon

Ministry Qf Fina.nca

Ph. (250}3S7 -732.4

.Fax (2501356~ 7'~2_4_' _. .,

From:, Armstrong; Glen IE FII1i:EK

Sent= frldaYr March 27; 20098:15' AM

To,: FIN SCP Tax Policy Branch ' Subject: FW: grobeal1dmail.com Ne\l\IS Update

51)10' comments - We' sHouhl start tumking them as they win heJp ~s r,emember alii rSSU{iS that .may rle~d to b~ iilddnass.eO,

even ff Just 0.1'1 the eom m I.lnica I:ion fro nt, in the event we eveif need them '

thanks

~ P;;';;:Gfen A~strong~~' -

Sent~ Frld'a,y, March 27, 2009 ,6:10 A~ ToO: ArmstrOJ19J GiM E FIN: EX

,Subject= Fwd.: gIQbeal'ldma'il,CQrnt News Update

, -

Begin forwarded message;

From: II'g.lobeandmail.com'il <gl'obeandmaU.com@em_aJ.tgl'obearndmaH.com> Date:. March 271 .2009: 4:41' :21 AM POT' (CA)

To(~- ---~-_-_ ] . _ .

SUbj91Ct: globe'anl rna I.com , ews Update

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TO'P STORIE'S

OntadU:S _ _tax ,gamble

With a recerd defklt pr,oj€ctl!!,d and a move ill seles U!X ha rmonlzation.~ OntariO's budget signais a oompl'ete overhaul of the p.tovlnoe's eeoncmlc policy., Will McGulnty's;, blg risk pay

,om 26{03/09 12.: DO AMI '

Suich!le ,Dttackln PakliStan_;kHls 48

, Officials say tow dozen people 'either knJed or lnji;,!li',ed 6:31 ,AM

. '

a.C.,Pr:fmr)jer'·,s,top sdyilser: _d t;.awn ["tp 5c<tpdal .

r:raucl t1i''iallnVolvll'1g former ministerial aides $uggeiSts p.at,tlck Kll1seiU,a Ued to·both Be Rail

a~d. tts buyer In 2004 26/03l09 10: 3:1. PM: .

flm !Eddav:

The Gl'obe reviews: MOl1stet:SV5. ,AUens and th~s week's ether flew mov,~es 12 ;.04 AM _

.1_0['0 on thee hj,gh seas ,

Or,y Hicks tellls; H~y!ey Mick that he needs two tJHng:s t-o cope w~thi the m I'~d-bogg~ il'lg

. so~ltude of dr<;:irng Anmrctrca ~ a 16rOOO-song ~ Pod and Don QIJI ixote .5: 13 AM-

What', !!u:n~n.g1_·Wlho·s buw:l~ng?

TOr(1I1to's c:f1Il~~d _reaJ ,estate market Is sinowrng promls.ing ~r'gns of CI thaw 26/@3/009 6: 18 PM

lR:elated~

I.ot:'o.liIto done de_mit

'Home Turf

The onlrne 00 lum.n dedkatedto co~eting fhe GTN's rea I esfate market.

(ji~i~~lr.~:

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·R.EIPOR,T ON BUSINESS

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G,@ltibger unveils "~new ry'es OUbL,:Ii:Urut .

U.S .• Treasurer pmposes SViI'~eplng 'rierorms that toughen i"egulaUons for big market

players 26/03/09 10: 13 PM .

Min uHf. CEQ, t'Cl::.rget :$ U,,5-mHUonJn ::m:D!. .

DepflI.rtlng DominIc 0' Alessandro to reCeive oom,pensation pacikagle f('!,r '.e:)C:1.iraQ'rdln~1l!'Y perlo,rmancef I niSlJt;er r;ejects s aY~:~ril-P~Y vote :2 6/0.3/09 4 ~ 3.0 PM

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Wan Street!~ recklessness has teppied the most eXlil,lted eccupetlon in the land. Ge,t ready, CEOs, ro.r a new jc b descrfptlol'l 26/031'09 7: 19 AM

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Alrora,ft had an abrupt Impac.tor at !eas~ twioe the G..Iforcefelt by top fighter j,el pilots, a dev.as.taUng blow that tore dOG rs ~ nd w'ndows 26/03/09 :I. 2: 00 ,AM

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pgnce arre'110 with herp of quletvi,llalg'er wlm was bit man twnled InfQ,r,mapt Quebec po nee makoe blker-relatederrests 4: 2,4 A~

po I It'lleal fa mill, respeetfu IIY..Jn,ol,&ogng In hann9nV

,Awkward spUt on the home fr,ont 1101" federal Finance Minist:er JIm Flaherty 4:.28 AM

Mu'rorney:,s c:h iefalCstaflto teSJtilfv' Bt hear:IM. .

Other witnesses to Im:!ude a former det'ence minlst@.i' and the widow of a flamboyant; ha,rd-Uv[ng pre rn iet Jk 21 AM'

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CU;rr"Cirirt strmulus; messu res wm ooi11'E;! back 00 ha'!.:H1t worJdew lIl>omy for ye ars W eome,

.TD's nrummend tells MPs 26103/09 1;01 PM .

Newf'QUM:d l.i:LD:d dolns I nto tile red

BI~mlng 'W@ark QII prices and 'iLHlllateFilIi actfo!'1 Qlf the I;la,rper gove:mtnenf/ province forecasts $7'50~mUlfol1 defictt 26:/03/09 :1.:51 PMI

SUPreme COUtlwgp"'t_hlegr D:ilr:alyzed M~s:caH.

Stephen Fletcher has been fighting iManrtGbal Publk·tn5ur,ance d&:isJ'of!l to d~Ii'IY more money for fillJ-tlm"e care 26/(1:3/09 11 :31 Ar~,

WORLD

Ind!:m~esian dam.-burst kill's 5Jl

Do;!';e ns mOire rn.Is:slng as wa II of 'W,ater :Sl!.! bmerges Ih undreds of homes 5:47 .AiM

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Isra eU-jets .c[e,$itrQyed I ranIB~§I [01ssh IRments for ,fBX.,. r!aaort's :SlY Strike 'Wo,uld hay,!:! been technkaUy, complex.,observeli's say 26/,03/09 5 :'24 PM

Po.t gu~sUolI'Is dOm~tiate obama's Qnfince fi::Ll'JUIn1

Spurted by ad:voc.ac.y g!rr.:u"Pr questiior'!:ers repeatedly raised 1e9I~nz.lng' 'm'1ildjuana26:/03/Or9 8:21 PM

lugldr, ,I~g ,Afghan detaine,~£iransf;et:s gets green, MalhI:

Cari'ilda'~ Military Police Complia1il'lts Commission rejects Harpe r goverrufien<t's attemplf:s: to put off [nquky 26/Q3/09 4,:16 PM

Britaii" ,,,,"d'ers frw:e.stig3 tiD" Into, to rtJu.re a nega tlans

:SJl'lyam Mohamed's says an MIS officer was ilJw~re he had been tortiured 2:6/.03/098: 54 PM!

Ke\ts to [w!epe!detjlc:e ,

It took me 'yearsl!o recover from teaching' my (laughter to dlrive. Stoml'lJil'lg Uh~lrnagJna.ry brake [$ terrif\t1lng' 12:0:0 AMI

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Many'sexu<:I'1 hea,ttn educators $,ayonry vlsceralliessons willi speak toyc'lJ'th, but they face' another chalieRge as some parent:!; seek special ,accommodati(lofor the'lr chUdren. What to

do? 26!03/Ci9. 6:.1 d ,AM .

X CflnallmJ;).ja:kQ,yqu to be my 'w~fe

Not(l'ne can, accuse late~nlght TV star Dalvid letterman of rusl1lng into marrtag,e2:6{03109

6:03'AM .

ltGI'm)! W'a~tet.s 'C'illfUor a Ugbtly rUJIl iSh ip,

New, econornlc rea Iny means C~ !'Iadfan farnllles need to create their ,own sUmtD Ius peu::kage,

experts say 26l0~!'09 EdlO AM '

ErDM arter coirnes 't;:om~.assj'PJQ " ,

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.somjw"IQve' and joy 26/03/091:2.:00 AIM '

HEALTH

Sling h!! grub MtQ beat D:gUon, studY' ,SOu'

Ws the: cheapest: and most effective wa:y to havea ,ru~~ltl1y b!;'lby 26/03/096:32 AM

\tacdi De li'efus.;ds ,S P'lU' ourthrea.k fears ,

Hundlred~ of tl1ousBJ;Jds I n Uktralne retuse immun fzatJans, a ti"t1lnd being seen worldWide, and dlisease could spread beyond Its borders 25/03/09 7;2,0 AM

''oy rn;d; ag-wDrd fot' Ca n,Oeir

How much of the disease caJri we reaUy cure and' cOIt'iquer? ,25/03/09 5;:2:9 AM

Reallmen ought to. cailDfu

Males who eat plenty of sOY,foodsare less Ilke.ly to be dl;:'lgno:5led with pm:;(ate cancer,

aocor'~il1:g to a new s~udy 25/03/09 '6:26, AM, '

5CIENC.E'

AystraUa la1r:qets trnch;; QiUle tnads

.Festllve mass killing takes place this. wtlekelnd to help 'CUll! the population 26/03/099,:37 AM'

~tI!rer whah:s, seen In GuK~of M\gle:g

One €!>lpef1t says rt may be time: tel'l ncr-ea,se estrmates 01'11 now rna ny of tihe creatu res are ' IMng there 25/03/09 7: 43 AM

50_ new $'piU:ie$ fOun~d - '. .

Dlsco''lreries In ,papua NE!'w G'IJ'nea Include brilliant green tree, frog wIth t'!tige bhllck eves, jumpIng spiders and strIped .gecko 25/03{D9 2:0'7 AM

Er Ning ,sltudvcb.HEenl!.l@s glDbal warming benef .'

1918 event fa'l' };trong.er than previfQus:ly thought, challenging flotion dl ma'techange' Js making eploocfes more intense 24}03109 2:42 AM

TECHNOLOGV

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With GQQg~e Books, 'The Internet gia,nt' ils looking b.eyond the a'ocept:ed WeD 2.0 Ideology26/03109' :10:00 PM,

Gop'gle'Rlets (e,advt21!lr» Canada's streets _.

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Reports suggest tl'l e computilng gia nt also plans to ~alV off about 4 per cent of its work - ~ fOice 1m th€! U ni~ad States~ or about 5',000 emp!oy~es 26/0i3/09 2 ~ SS PM

SPORTS

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'Ch~n. takiaS wa,rl,[i sUver .

CanadIan ta~ ~tond spot tn men's slng:le:s at: figllrE:i skating ch:ampions.nlp15 4,:00 AM

QUer;liJose grgund liIl desert

Edmonton falls back in playoff race a:fter narrow toss ~n Pho'e:rl~x :I.: 45 AM'

g,eUman: C,ocyottliS are staving put

NHL 'bOmlrnls$ioi'H~lr says teem .may get I1'I~W owru;!r, b~t wil'l not be movli!i!g 1:l::33 A:M

_MasQ,., be,i;ltsCm!uciks to.r first t;l.me

St Louis oontlnU'e.l';· late erN,e for playoffs by d'Olii bUng up on V.anc;ouverl :22 AM

FI,am@s shut out {l19211o

Mason makes 33 savesIn NHl-best 10th sl1u:liout as Calg,lIry fans to SCO>F£'! .for second

strafght ,game 25/03/09 11:14 PM '

ARTS

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canad.lLjel'Bay mill!y 'POw '"dude VAN-Ole hmo'

Hockey Canada looking at putting' bt)e ,2:010 leon 'on the sleeves 26J03j09 'l:27 PM

BDudreau rips med(,a oyeJ: Oyec:blkln cel'e:bration

Cap:l'tals ooou:h repot1~Ji.~i o~ RJUSS!Ciii'SSOIlh goat! ce~ebration wa:s bfown",out of proportkm26/03/09 e: 11 PM

hac slashes fyn.tHng fot'top,l!Cirme-tlm_@shows. '. _

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6

Fllanagan" P'au:IFIN:,EX

Fllom:

Sent:

To:

Subject:

Ar.ms~rong, Glen E FIIIN:EX F~day, March .'27, :2000' 12:53 PM Flanagan, Paul' F'IN:IEX

F'W: hannonizatlon

IFrom: Armstrong. Glen E FIN: EX ,Sent: Ftiday, March 277 2009 9;16 AM 10.: lf1anag~n, Pa ul FIN :EX

SlU.ltject: harmonization

We: wi.l'l hav,e to lIIpdat!1! the BN 'for the Minister based on the MOU, We should think about ,ilIlll{ q.uestiOns,/ da,rlfkations we need from the feds ra: lIIew rule's sowe can provide an update next week.

l..s.: '

~----------------------------------------------------~

Cheers

From:

Senf:

T,o:

Subject:

- ,

Colle, EUzabath FIN:EX

Monday, March SO, 2009E!l.:"U! PM Armstrong, Glen E FIN:,EX

Cayer Artrcr.e

FyJ, this Is the ,artfcle

Case for hal'IDonized sales tax :in B.C~ more ,compelling than ever Vancouver Sun.

Monday, March 30:,.2009 Page D08,

By Don Cay()

The ease for B,C.to hermordze its sales tax with the GST has ]ong been SU'Ollg. Now it .is even more

cOlnpe]]jng. -

The tcrigbreris Ontario's sickbed conversion to sensible t1X, policy.

Premier Dalton M'C.Gul~tyand his cabinet have, Judging :from the budget they tflbled l~st ~clc, looked at fheh: ailing economy and rseegnizedthe need for strong medicine. TIley responded with eorha reduction of eorporateiecome tax - from ] 4. per cent to 10 pet' cent to' be phased in over the next four years -~ and a decision to harmonize Ontario's provincial sales tax. with tbe federal GST.. '

It's Ontario" not B.C., that is play.ing catch-up on. business tax-rates. It stands at' 11 per cent beret and. it's on its way down to 10 per. cent by 2011~ ,::tftel' aseries of'redaetions from the I6.5~per-cent rate in effect when the current government took office,

But on the PS'TIGST front) the shoe is now tightly laced on the other foot ..

.,

C.D. Howe Institute president Bill Robson spoke for a lot of anaiysts when he called O~tario '3 harmonisation 'plan overdue, badly needed; and t~.mely. He sees it bolstering investment in Ontario in bOoth the longand the short term,

The exact same analysis applieS now, and alweys has! to B,C. But !betels all additionall:eason for our government to acr-» to maimein OUl"pl'ovinceds-p'Qsition vis-avis Ontario.

Whep. three of the A tlantic provinces harmcnized their sales' taxes with the GSl"':rtlQre than a decade ;ago, it bolstered business investment there 'by, acc'ording to some estimates, as much as .17 pel' cent. Yet It1s; quest[onabl1e how much of Hmt mvestment could or would ha!V'e come to B.C. if they hadn't offered a better tax environmentthen ours --- the Atlantic provinces have a lot of other cost disadvant~ges~ indudi_Dg remoteness from. markets and generally high taxes,

Bu~: Ont~uio? Irs a direct competitor for a lot of ~yestment British Cclumblans would Iike to see come here. And with Us established manufacturing economy hurting so badly, it's an aggressive competitor, We can inafford to leave unchallenged this new major tal'{ advantage U's creatlng for itself

The obvious appeal of a harmcntzedtaxis the adm1nis1u3iti{)lll and compliance costs it win save, There'd be just one tax for businesses to collect, and one for gcvernment auditors to pollee. '

. But aecuple offundamenral differences mean much mere tban mere, administrative savings. One of these contributes to its undeniable unpopularlty with consumers, although I drink this: has more to do with poHtks Wid dis.Hk,e ofBrian Mulroneythen with analysls. But the other means that. when it comes to fostering gmVirtb,

and prosperity, it's a fur better tax than the PST. .

.1 -

The unpopular difference is that GST is more bro.adly based, applying to both goods and services, with few exemptions .. The "tax. effkiencyll di.ffCl:ence ]8 that GSTtlntes things of value on~y once, while PST can tax the same component of a product over and O'VeE and over a.gain.

. .

11.08 the PST can compound several t[mes over by the times. censurrtermekes a purchase. Every business p.ays

it on every input that goe.s into their product, and it must often. be paid again and agaiaat intermediate stages. With GST~ any t~lIt paid on mputs ~s refunded, and only the final product is subject to tax.

Critics will be quickto point out that a. harmonized tax will sbift some tax burden from business to consumers .

.. They're right. About a third of'the tax. oon-entiy raised. by P8T is paid on. business .inputs, and that WOl1k1 be saved under a hru1llOflized tax.

But Increase in total taxes paid d.irectly by consumers will be balanced, at least fupart~ hy savings on. ilie cost of goods made from inputs that are taxed and re-taxed by the .PST.

And. governm.ent coo easily protect lower 9;iJ;d· middle-inccme consumers from tlrDy such. tax,inCllease. Ottawa already has a system of OST rebates that can be bolstered if,the tftX rate rises under harmonization, Abo •. On.triuio is pledgingte rebate to consumers virlually aiU of the $4.3 billion it win get from the federal

government to assist with harmenizationeost. . .

That's .a; vel'Y large spoonful of sugar to help' the medicine go: down, And federal Finance 1vlin~sfer lim Flaherty is so keen to ge:t more provinces on boardwith harmoruzatlon that i:t!·s a safe bet B..,C. could negotiate at least as sweet a deal, ' . .

cete, Elizabeth FIN:EX.

From:' a,ent:

To: : ,C,c;

SubJecti

Armstrong, Gl1en E;: FI N: EX Thumd'ay" Ap.lil 2, 2009 10: 19 AM

Foy, Anne HN:IEX. _

FIN SCP Tax POne)! Bral'1.d1 _ . _ . . _ _

RE:: What our tax"'Ss need is l1armonitSiflon (Ttle Vanoouver Sun, 02 Apr 2009'" 'Page .A15)

thanks

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F'ro'm~ Fay, Anne IFiN,;EX

senlt: lhuli5~,aVI AprIl 2" 2009 10:18 ,AM 'To: Armstrong, Gten E'RN:'E>(

S~bj'lect~ .RE: -VIII1Hilit eurtases need [s harmol'bitatiool (The Val1loolJVef Sun, 0:2 Apr 2009, Page A15)

These are the only quotes'l h~ve seen = both from Match 30~11

Minister Hansen says he's oot soid on the idea of1Uel'g[ug the PST and UST - CJ:.1]\1L .... 8:(l{l AM _ .. March 30,

2009 -. . - .

Announcer: It-seems that OUF province will let Ontario be ~e guinea pig when it comes to merging the federal and provIncial sales taxes" A wait and. see approach. from B.C.·s Finance Minister.,

Reporter: Ontario will begin collectiog provincial sales lax ~dong with OST in the frum of lit new harmonized tax next year. B.C •. Finance Mi:nister 'Colin Hansen says .he,ts still not sold {lin the idea.

Colin Hansen: An HST would have the advantage of being a far more simple program to- oon"rin:ister. The adm1nistl'aH.vc side :wou~d be much less CO'5dy on small businessesIa particulsr but Ute of her side of it is that it would give us; less flexibility as a. province in terms of what a sales tax would or would not apply '~O.

Reporter: Quebec and most Atlantic provil1.ce.salteady use an. lIST.

top

MinjsterHansen says lots of iii put Is needed 011 tin: idea ofrneig:i:ng the 081' and PST - CHNL ~ 7:00 AM-

Mrudl 3 O~ 2009' .'

Announcer:: Should two become .one? A walt and, seeapproaeh from British Columbia's Finance Minister regarding the whole idea of.mer,gulg the £eder,al and prcvinciel sales taxes.

- . .

Reporter! B.C. Finanee Minister Colin Hansen says his government has considered merging the provincial sales tax with the as! but isn '-t ·lieady to move.

Colin Hansen: You know we're Certainly going to fellow with intereSt what Ontario Is doirig but] think as we

i

will see Rum the debmte in Ontario jt~ s clearly a cDn~rovcr.sia1 move and nne fual we would celtahuy want to o:etsc lots ann-out ,--

C1- . L. , . p- - .......

Reporter: Ontario announced last week it would join Quebec and most Mill'.ttlime provinces in collecting one . provincial and federal'eomhined sales tax. Hansen says tbe HST would be easier to administer but would- ,£11.$0' tske away B.C. controlover what goods'mld. services the ta-x: would be applied on,

,Anne Foy

Tax polICy·Analyst Ministry of Finanos

, -

........__ ...... ~_ .. ~r __ ... __ • '_ ................. _~~ I ..". ..... _.;._.~~ __ .... _"""'.,. ~ ...... I.I-.. ~_ ... , ....... ~~.__ -- -- .... .,.,..-. __ ..... _._.._ - ... ..,'__.,.,.--.~--.- . ....__ -_,._ ... ~ ••• _.,~- . .... ..... ----

From:: Armstrong, Grel'! E F1N:EX .

_ Sent~ l'hursdaYi AprH 2, 2009, lO~13'AM To:, fIN SCP Tax. Policy Branch

SubJect: FW: What our taxes need is harmo.l1lzatlon"(The Vallco,il,ver Sun, 02 Apr 2009t Page A15)

, ,

HCI'S I1'Inyoneseen any q uetes from 0 ur M fn iste! r or the Prem ie r ,011 l1arm:onlzatio n 7' If so pJe,(l.se sha re wah me ..

Thanks-

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Fro'!l~ gl'enarm:Strong@sh~w,.'ca (ma.rlto:,glenarmstrong'@sl'la,w,ca] Selil!t: ltuJtsdl'aYI A,prH 2, 2009_6,:37 AM

To,: Armstrong, Glen E fIN:EX

S.ubj'ect~ What OUt taxes nEled is h~rmol'i~z8tio" (The Vancouver SUit'll 02 Apr 2009; Page A15),

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Who! 'our t[]~e'5 n,=~t! 15Ila,rmO!lIltlUOfi

I

JON K:ESSElMAN

"~bat our (aX,es need is harmon'ization

2

The Vancouver Slm 02_Apr2009

It! s no longer a matter of ~~ if," but simply (, when." Last week, Onmrio. one cf the few remaining provinces to havea separate sales ras, and the la:rgest of those provinces, announced it will be merging its provincial sales talK with the GST effective ... f€/ld I1wreu_.

ThTS emaU was £~1'it to you by OJ Times Co,lonist Digi.talu&e:r. This ~erVke cO.!ltaiti~ co.pyrIghted materfu:l~ trade m~ and olber p,ropdetaJ)' mf(]nl1a~ion,. Receipf of this email sil:ould n.ot ;be interpreted as grant of any licences lexpess or implied,1u the lnilellecw,,1 pmperty of Can West Media.W.o.rk$ PubUcm[(ll}S Inc ..

This emall Was sent t<l you by Ne\vspape.rDil'ecl" Inc (20n~]3 r II Vamcr Plaee, RiclimMd, HC, Canada WiN 2Jl, phone 1 61)4 278 46Q4) on behaJforTim~Is CoTonisl OigitaL

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I Arms.tron p, Glein t:: F~iN: EX

From:

Sent~ TQ:

CC~. Subject;

Armstrong, Gllen E FIN:.EX Momj,ay, .April 6, 2Q09 10:39' .AM Fla:nag,an, Paul FI'N:;E.l(

IGoss.,-Jordan T .FiN:EX; Cole', Elizabeth FIN:EX

ilarrnonr.zatJon .

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eil n you puU so rnethi nil: together for diLsClIsspon dfter my holi:day?

Thanks

From,: ,Sent: re:

Cc:

SuIl:19ct.:

Cole, !EliZabeth F~N:EX

Wednesday,. Apr:ii8, :2:0091:1'2 PM Armstrong, Glen E FIN:EX

Flanagain; P·aull FIIN;:EX Harmcmfzatiol'l ADM Re.spO!1oo' Letter

I've iilttached a draft of the response. The public quote from the Minister W1.l:S

Colin Hansen; You know we're certainly going to foUow with interest what Ontario is doing but I think as we will see from the debate m Ontad© ies.cle.ady a controversial moveand Oi3Je that we weuld certainly TVOlnt to ge,ts lots of laput on.

I

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Fr(lm;:

Sent:

To:

Subject:

Cole, Elizabeth FiN:EX

Wednesday, Apn',115; 2009 '12:4'7 PM Armstrong. Bl'en E FIN:,EX .. KesseJman Harrooniza;Uorl Mole

B.C. should f-ollo,w Q,ntar'io's Ife,ad' and merge rts sa.lea, lax with the' fed,eral GST ~.o.nly do it, . better

,By Jon Kesselman! Special to the Sun Apdl21 2009

IB.C. shC:u,f,ld not retalnslpeciaJ exemptions f'Or various goods ,and s,erviices, that' exist undier its

sa I_s 'tax. .

U's no h:mger a matter (If ilifjll burt sjmply uwhel1.,~! Last wee.k; Ontario, one of the few r~malnhlg pr,ovinees to have B. separate salestaxj,a nd the! Jar~gest of those provinces! an nounced it wm be merg.ing ·its provincial sales tax with the GST effective mid~201'~.

The only question is when British Columbia win follow suit wfth a hermonzsd salles tax ..

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HarmonJzing pr-oviindal sares taxes wJth the federal GST is important for several reasons. .

first, Jt sharply reduces bu:s.inesses'oompriance burdens of having to dealsimu['tanecusly w,jfh twci separate sales tax s;ysrems; Ontario busin€\sses, are projected to. seve $500 miUk:m annually from harmonization,s savings that will flow through to consumers.

Second, by extending th e pmvJ nola I sales taxto t\h,e wider range of good s a no services cove~ed by 'the GST" distorli'Ofls in coneumercnolees are reduced. Consumers also find it simpler to have a single;t 'comb~ned tax rate to apply to their purchases ,and to have the same items taxable bof:h

federany' and provi ncia.lly, -

Th ii~d j an d most importantly, harmonizaUo n eliminates the bu,rd en of the provinciar sa lsstex on bus~nesses" since they would obta.ifl.Jnplit tax credits for their payment of provinclJa~tax just as they do now for their payment of GST on purchases, In B..C.; this, relief would be about, 40 per cent of the

teta I' $5 bimon sales tax col lected ann uarly. .

Elim,inating the provtnclelsales tax burden on business would make B.C, products tnorecompetiUve both with in Canada and to export rna rkets .. ~t would a lso provide ,8 major impetus for increased - 'investment, with associ'atedjob creation. Sa.les tax harmonlzatrcn has been estimated to pro,videa's

much incentive for investment in B.C. as would "the complete aboUUatf1 of provinci,al corporate ~noome

tax. . -

B.C. 'wUf be under: ,Incre,aslng pressure to'fo.llow Ontario]n hs_rmonizing safes tax, siince our businesses will' beoompetlng with those in ·Ontario and~ive other. p rovinees that do' not bea r

provincIal sales tax burdens. .

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B llt sho Ulld 8, C ,: simply foU,ow the Ontario m cdelfor ha rmcmiza~ionl, or shou Id OU r prOVIIFlCE!' pu rsue· a

dIfferent, better path? . .

I~n' four key areas, B. C. can and shou Id· do, co.nsiderably better than Ontario I~n h,ow Jt 'fashions .a sa ~es tax harmonization ;agreement with the federa~ gov1emment

First" B.C. should not re'ta~n speciall exam·pHons for valiious gtoods and services that exist .under its sales tax. [no oontrest, Ontario wiU mainta,~n ,ex.istfng ta.x exemptions for books" children's ,clotlhi:ng and Joo,twear, chndren'~s car seats, diapers ,ahd femlnlfne hygiene prcdeets bY'a so~cal,[ed p:o.int-of-sale e~e.mpti,on system. Those products wUl bear onjy~he fiv,e-per-oent federa,! GST butnot the eight-per~

cent Ontarila, P'OfUOIl of tax, .

a;c. s,rmilarly exempts most of the .same products as Ontario as we~1 as others. Far better to, maike thOS·9! items taxable both"federalily and prov'!ncia:lly under a harmonized tax, and to offset any

add itiona I bu rden on low~ and mo derate-lneom e households thraug henrlched taxered its .. Th is. approach av,ords both adverse dis,tdbuUonal impacts and complexities iin the operation of the m'x for

business an? govemment .. .

SeoondIB:C.should implement harmonization with tax-inolusive prricing. As with a few goods. or $,ervices curren1fy (suchas gasoHne· and tax] fartils)., aU posted prices would~nC'~ude the harmon:tzed

. tax. This approach woultd s,impUry matters for purchasers andalso reduce adverse rea,ctions from the extensi on of provi'nc~a.! sales tax: to out-o,f .. home meal's." wlhich w~u:!· not a n issue ror 0 nltar~o because It

a~ready taxes restaurant and other meals over $4. .

Third, B .. C. shou~d seek a modifica'Uon of the current GST treatment ·of Inlew hciusing" which applies to seles with a partial tax credit for lower~valued· units. Given the high cost of the land component in urban B"C'J the hermonlzed tax should be based on the structuiral value and excl~ude the jand vafue .. Otherwise! a .$900,000. new home, VilQuid faoe lhe fun 12-per~cent harrnonized IB.C: tax rate, JOf a tax

brJI Of .$1'08,0'00 that wotilid ralsetne total above $1 miUion. . .

Finany; B.C .. sh'ould avoid' Ontario's s.low~moving provUdon of input tax credits for ,[:arger buslinesses

(with annual sa~es over $10 mUllon) and ·[in.anc:ia.llnsUtu~lons. ..

They' win be depied in put tax or:ed its for the f,jrs~ five ye,ars after he rmontz:ation statts and not obtain . full credits for another three years. The ,largest econcmtc benefit of harmonization was preC!fs,e,1iy the e{,~mination of tax burdens on business, and Gntar,~o Irs. stm~ng this ·process.~or ye·ars.

A princlpal reason. that B.C. can move much faster than Ontarro in givingl fuUI j·npuHax credits to .all! bus~nesses ls the differjngfisGa,1 setUngs. Ontarids recent budget announced at phased cut in its' general corporate Income tax rate from the current 1·4 per cent: to 11 per cent in mud-2012: .. B.C.ls generBlt corporate rate ~s ,already 11 per cent, :80 .B.C. Ms;:; add~tiona~ flseal [seway to move exp.ediUouslyand reap the full benefits, of ha,r:monlzaUon.

Ontario has shown that sales tax harmonization is fiscaHy,~echn~ciSdly and pOlliUcal:tyteasible. ,s.c. should quickily foUow suit and pursue 8f11 even better course. .

Jon Keseelman is the Canada. Researcb Chaii:r in Publfc IF'inalnce with lhe gradu8t,e, publie po.llicy

proOgram at Slmon Fraser·Universn.y. .

Co'lel' eUzabeth FIN;E,X

From:

Sent:

To:

Subject:

core, EI:lzatJelh PI N;: EX

TUE!-sda,y, Apri,l 28, 2(109 7:54 PM Flanagan, P,aul FIN:EX Ofscus,sion

l.S.13.cS,~ . ,

From:

Sent:

To:

Sub1ect:

Cote, Elizabeth FIN:EX Thursday, April ,30j 2000 4:59 PM

F' " Paul F,IN:IEX

Q

L:,ji3'

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Thanks".

,Col,a, Elizabeth FIN:EX

Fro,m:

Senlt; To:

SUI~IaiCt:

Armstrong. GI:en IE FIN:EX. Wedl1lesday, May 6,,, 20098:11 AM C,ore; Elizabeth FIN:EX

'GST hanna,niza:lion

I~, 13

cheers

1

Fn)m; San!:

To:

Cc:

SubJect:

Louise. LelJol'lian@fin.gc.ca MOfldiay, Mla<y 111; 2(l09 10:1.3 AM AJfllstrong. GI'e.n E FIN:EX,

Use, Potvin@fin.gc.ea

R.~: HST Q ues'lion

L

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:Louise LeV(l;nian

Assistant Olepllty Mll'lis~er I Sou$,-minrstre a<:!Joint

Tax Fal.iey :Srandh r Direcf~on die la politlque' de l'imp6l Department o'f Fftf,'lince Canada II M.in:ist&re des Fina.nc~s C.anada Ottawa, Canada K1A OG5

.low'!te:. Lftyoniao@fiIl,gc .. ca

1 elephone I r ell!lphon,e 613~992-1630 I Facs:lmille II Ti!teoop~eur a13~996·0660 l Teletypewriter I nMiirnprimeur 613-995~

1456 .

Government ,of Canada I GOl.!vemement du Canada

.' ..

Department oJ Fll).lIn~ Canadll

Canada

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F.rom: Armstrong; Gl'en E FIN:EK [~ailto:Glelll.Armstrong@gov,.bc.cai]1 Sent: May 11, 2009 ~2::45 PM

To~ Levo!l'danJ Looise

Subjea= HST QI;l€is~Qn

Ont Ina!l' ,chang,e r,ab!! after 2 years. Am Iii correct lin assuming a province, could now start at a rate' other than B%? Tha'~ iSI that the legislation w~~!1 be amended by July 1, 2010 to fet a prov harmoni~,e ·at a rate other than 8%1

Thanks

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