Many people in Ontario are viewing plans to to combine provincial and federal sales taxes into a harmonized sales tax (HST) as a money grab.

But the Provincial government’s tax reform plan also includes lowering income taxes.

It seems that part of the government’s plan is not generally known, and Ontario’s Revenue Minister John Wilkinson went to some lengths to stress it recently when he addressed a luncheon meeting of the King Chamber of Commerce.

“You might not have heard that,” he told the audience. “You heard it from me, and we have been saying it since our budget.”

He added these planned cuts are going to benefit about 93 per cent of the population.

As well, since people with lower incomes usually get hit hardest by consumption taxes, there will be permanent tax credits, including those for property tax payers (they will be bigger for seniors).

Wilkinson received quick consensus from those on hand that when the current recession ends, the economy is going to have been changed. “They know the world is not going back the way it was,” he said.

He also reminded the audience that high quality public services cannot last long in times of high unemployment, when fewer people are paying taxes and more people are drawing on social supports.

That’s why tax reform is needed, Wilkinson said.

Many countries have been cutting their income tax rates, and he also pointed out several provinces have already harmonized their sales taxes with the feds.

He added countries have set up one level of valueadded tax, with Canada and the United States being the notable exceptions. Wilkinson commented that one level of this kind of tax is one of the criteria for countries seeking to join the European Union.

Ontario has been one of the few hold-out provinces, when it comes to harmonizing the tax.

He also stated there are a number of positive aspects of GST that have never been part of PST, and that’s slated to change with the introduction of HST. Businesses collect GST and pass it on to the government, minus the GST they paid to acquire the products they sold. Wilkinson said that prevents GST from becoming a tax on tax. He said such credits are currently not paid on PST.

“We have tax on tax on tax,” he remarked, pointing out it’s already imbedded in the price of what’s sold. “It’s a hidden tax.”

Wilkinson added that too much taxation impacts on the entire economy, including employment figures. He said there can’t be quality health care and education if people aren’t working.

The government’s plan is to broaden the tax base, while permanently cutting income taxes. In addition there are plans to reduce the tax burden on small businesses, since it is they that are the biggest generators of new jobs in the economy. The plan is to do away with the small business surtax. “We’re going to be the first province in Canada to do that,” he said.

Wilkinson added the costs for businesses to expand or to come into Ontario are being cut.

“We can’t send a more powerful signal to business that we need the private sector to pull us out of this recession,” he declared.

There’s not going to be a massive increase in prices once HST comes in. Wilkinson said about 20 per cent of items taxed are either five per cent (GST) or eight per cent (PST) will be taxed at 13 per cent. He added the price of a lot of products will drop, and they will make sure consumers see that.

HST is expected to take effect July 1, 2010. Wilkinson warned the accompanying savings won’t come into place instantly. But he predicted 80 per cent of the savings will be seen in the first year, after the market has adjusted itself. He added the the feds have been urging Ontario to harmonize the tax for years, but the Province has said it needed help. That help is being realized, in the form of $4.3 billion in transitional funding, which Wilkinson said will go directly into the economy.

The coming year is going to be one of transition, Wilkinson said.

The ways of doing business are about the change, and those people who have seen the changes coming and adjusted their practices accordingly should be in good shape to deal with the changes. He added those who haven’t adjusted “I think will be in for a bit of an awakening.”

“Those who plan do better than those who don’t have a plan,” he added.