Ontario government green lights HST

The Ontario government has passed legislation to create a harmonized sales tax of 13%.
The HST will be implemented on July 1, 2010.
The implementation of the tax will result in a one-time hit of $250 million for the insurance industry at the end of 2009, Don Forgeron, Insurance Bureau of Canada’s president and CEO, said during an Oct. 28, 2009 luncheon in Toronto.
Going forward from July 1, 2010, the cost of running businesses and settling claims will increase, he said.
“Because of the unique nature of our business, the tax has a retroactive impact, despite the fact that it’s not a retroactive tax,” Forgeron said at the luncheon.
As of July 1, 2010, all of the claims that are outstanding will see their costs go up. Actuaries will have to book their reserve changes at the end of 2009, he explained.
“That’s going to cost our industry $250 million on a one-time hit basis at the end of the year.”
The government also announced reductions in Corporate Income Tax (CIT) rates for large and small business.
The general CIT rate will be cut from 14% to 12% and further reduced to 10% over three years. The small business CIT rate will be cut from 5.5% to 4.5%.
A chart accompanying the government’s announcement shows that almost all sectors of Ontario’s economy will see “substantial tax savings from the HST combined with the permanent sales tax cuts.”
When fully implemented, businesses will save almost $4.5 billion a year from replacing the retail sales tax with the HST. But in contrast, it will cost the insurance sector $160 million, the chart shows.