Special to OES Talks

Editor’s Note:  David Bradley is President & CEO of the Ontario Trucking Association (OTA).  OTA (www.ontruck.org) is a business association representing motor carriers operating into, out of and within Ontario.

For the Ontario trucking industry, the recent budget announcement by provincial finance minister Dwight Duncan that Ontario intends to move forward with a plan to harmonize the provincial sales tax (PST) with the federal goods and services tax (GST) starting July 1st, 2010 is extremely good news. We have been seeking this announcement for a number of years and it’s been a key recommendation of virtually every OTA pre-budget submission this decade. For far too long the trucking industry has been living with a business input tax system that is outdated, archaic, uncompetitive, administratively burdensome and discriminatory. In a low margin industry like trucking, taxes on business inputs, which a company must pay whether it is generating a profit or not, are regressive and a drag on investment in newer technologies.

Truckers, more than many other industries in Ontario, and certainly more than our competition from other parts of Canada and from the United States, where key business inputs such as tractors, trailers, parts, etc., are either eligible for GST-type credits or are exempt from sales tax, have had to endure a situation where the more they invest in equipment that is more efficient, more productive, safer and more environmentally-friendly, the more tax they have had to pay.

In addition the trucking industry must administer at least three different sales tax regimes – the provincial sales tax (PST) on equipment used solely in Ontario, the Multi-Jurisdictional Tax (MJVT) on equipment that is used domestically and also in other provinces and states, and the federal GST. It’s important therefore for the government to ensure that the new harmonized sales tax will include the MJVT, which is a special form of sales tax specifically levied on extra-provincial trucking operations.

Finally, harmonization will also address another longstanding complaint of the industry – that while the current PST is supposedly only applied to goods and not to services, for some reason maintenance and repair labour has also been subject to provincial sales tax. Under a harmonized system, truckers would receive input tax credits for this service.

While there is no doubt that any tax change of the magnitude of sales tax harmonization will be difficult, the unavoidable fact is that the status quo is dysfunctional for industries like trucking. With the current economic crisis upon us, we can no longer afford an unfair, inefficient, and regressive sales tax regime. The question therefore becomes not one of should we avoid the challenging task of reforming our sales tax regime out of fear of change, but rather one of how do we craft a simpler, fairer, harmonized system that applies sales tax in a more appropriate manner that minimizes inequities and opens the way for economic growth based on a fairer tax regime. Simply defending the status quo is no longer an option if we’re going to make Ontario more competitive as we move out of the current economic crisis.