Dec. 03 2009

MPs have paved the way for harmonized sales tax legislation for Ontario and British Columbia.

They passed a ways-and-means motion Thursday, amending the current Excise Tax Act in order to allow the provinces to implement the new tax, which combines the GST and provincial sales taxes into one lump sales tax, and not two separate taxes.

The tax will increase the price of some merchandise that did not originally have provincial sales tax, like condominium maintenance fees, and gas.

Ontario and British Columbia planned to implement the controversial harmonized sales tax once federal MPs passed the legislation. It will start July 1, 2010.

The Conservatives, Liberals and Bloc Quebecois supported the motion, which passed 192-32, while the NDP opposed it.

This was the first step towards implementing the tax. The government had to amend the current Act before being able to introduce another HST bill expected on Friday. It all needs to pass the standard three readings in parliament, the Senate, and Royal Assent before it can be made law.

Up to 15 Liberal MPs were absent from the vote.

The high absentee rate Thursday may be due to the fact that before the vote, some Liberal MPs said they did not agree with the tax, but felt compelled to vote along party lines.

Liberal Party Leader Michael Ignatieff blamed the absenteeism on the timing of the vote, and not on any disagreement within his party.

“I came out of the lobby having voted and there were 15 of my members in the back lobby just because the vote was accelerated,” Ignatieff told reporters after the vote passed.

“You’ll see on the subsequent votes that this caucus is united,” he said.

B.C. Liberal Keith Martin was campaigning against the bill as recently as Tuesday.

Ujjal Dosanjh, another Liberal MP from the province, said Wednesday that he did not support the tax, but said he would vote for it in Parliament, because his party’s leader demanded his caucus to do so.

One political analyst said the MPs fear a backlash from voters in any upcoming elections.

“(Martin) would like the opportunity to vote against it and score some political points with his constituents,” political consultant Michael Geoghegan said in an interview with CTV News Channel before the vote. “He knows that this HST is very unpopular in British Columbia. He knows he’s going to have a real challenge in terms of getting reelected.”

Geoghegan, based in Vancouver, said the decision by Liberal Leader Michael Ignatieff to support harmonized sales tax legislation could leave some members of his party in a tough position, but the move was a matter of “political survival.”

The Liberals’ support means the party risks angering voters in Ontario and B.C. It also means the NDP, which has been catching up to the Liberals in the polls, can capitalize on anti-HST sentiment.

Ignatieff said his party supports the HST “because the provinces want it and the province is saying this would create jobs for Canadians.”

But Geoghegan said he sees several motives for the Grits to support what many consider an unpopular measure. For one, the already weak party may not want to rock the boat by challenging the government and possibly becoming even less politically stable in the process, he said.

Second, Ontario and B.C. have elected Liberal provincial governments. And third, Ignatieff doesn’t want to be seen as going back on his promise to support the tax change, Geoghegan said.

The Conservatives introduced the bill and have offered $4.3 billion to Ontario and $1.6 billion to B.C. to ease the transition to the new tax.

The two provincial governments have argued that harmonizing sales taxes will make their economies more economically competitive by streamlining taxes on goods and services. Ontario Premier Dalton McGuinty has said the tax will help the province recover from the recession more quickly.

However, critics say the new tax is a gamble that could wind up hurting the economic recovery where the HST is implemented.

Last month, Ontario announced several goods and services that would be exempted from HST, including:

* “basic” groceries
* health and education services
* prescription drugs
* childcare
* fast-food under $4.00
* newspapers
* books
* children’s clothes, shoes, car seats and diapers
* feminine hygiene products

It also said it would provide income tax rebates of up to $260 each year.

Nova Scotia, New Brunswick and Newfoundland and Labrador already have HST.

Ontario First Nations members shut down a major Toronto street as they marched toward the provincial legislature, angry that they would lose their point-of-sale exemption from the provincial portion of the 13 per cent harmonized sales tax.

A group of four chiefs led the rally Thursday to protest the lack of consultations with members of First Nations. They argue the HST would make already expensive items unaffordable.

“This is where we have to draw our line in the sand,” said Grand Council Chief Patrick Madahbee from the Union of Ontario Indians, which represents 42 First Nations.

“Already action is being contemplated out in the communities … and I think this could be an escalating issue right across the province and right across the country.”

Ontario Regional Chief Angus Toulouse said First Nations were looking at all possible options to stop the new tax and to ensure that his peoples’ right to tax immunity is respected.

He has already spoken with First Nations leaders in British Columbia, which is also moving to a harmonized tax model, and has secured their support.

With files from CTV’s Jane Taber and The Canadian Press