TAX NEWS - June 2010

Ontario Tax: Ontario Conservatives comfortable with calm response to HST

By now, the story is familiar.

In response to the new harmonized sales tax, British Columbians are having a mass freak-out that's forcing cabinet resignations and giving the opposition a 20-point lead over Gordon Campbell's Liberals. Meanwhile, as the same policy is set to take effect July 1 in Ontario, the province seems to be greeting it with a collective shrug.

This is all supposed to be driving Tim Hudak's Ontario Conservatives mad with envy. But if so, someone forgot to tell them.

Even beyond the typical bluster, their strategists seem genuinely comfortable with how the issue is playing out. That's because, never under any illusion that Ontario's situation is comparable to B.C.'s, they're playing the long game.

From the time that Ontario's harmonization plan was announced last year, there's been little prospect that it would have the potential to single-handedly doom Dalton McGuinty's government.

The most obvious reason for this, which Tories readily acknowledge, is that Ontarians aren't as easily riled up as British Columbians. There's little history of populist fervour in Canada's largest province, and largely for that reason there are no direct democracy tools – like the recall campaigns under way in B.C. – to further raise the temperature.

There's also a well-documented plethora of differences in the way the HST is being implemented in B.C. It was introduced clumsily, coming as a broken promise by Gordon Campbell's Liberals just weeks after last year's provincial election, with very little communications strategy to sell it. It followed hot on the heels of a carbon tax unpopular in its own right. It newly affects restaurant meals, for which British Columbians have not paid provincial sales tax until now. And it's not been accompanied by "transition cheques" to help soften the blow, though it remains to be seen whether those will have much positive impact in Ontario.

Beyond all that, there's also an inescapable difference in how the main opposition parties in the two provinces have been able to approach the issue.

In B.C., the New Democrats can make a principled and non-conflicted case against a shift of tax burden from businesses to individuals (at least until any savings are passed down to consumers). The same goes for their third-party cousins in Ontario.

Mr. Hudak's Tories don't have that luxury. Their ties to the federal party that championed the HST, combined with the fact that they don't fundamentally oppose the nature of the reform, have limited their ability to benefit from the issue in and of itself.

So instead, the Tories are hoping to make it part of a bigger narrative. Heading into the October, 2011, provincial election, they want to paint a picture of what one strategist described as "Dalton McGuinty's relentless assault on the finances of ordinary Ontarians."

They seem confident that if they repeat often enough that the HST is a "tax grab," they'll be able to lump it in with other perceived incursions on voters' pocketbooks – including the health tax imposed during the Liberals' first term, and rising energy prices – to drive home their message that Mr. McGuinty is out of touch with the pressures most people face.

In this context, the Tories also defend their decision not to commit to repealing the tax (which they won't do) or shaving off a couple of points (which they might). They prefer to leave themselves room to promise other forms of tax cuts, if they think they can get a bigger bang for their buck.

The Tories' focus on the more superficial aspects of the HST, rather than the substance, doesn't always convey a great deal of substance – a prime example being this week's contrived outrage over transition cheques being sent to prisoners serving less than 90 days in jail. But they seem content to poke away, in hope of fuelling emotions that needn't reach a boiling point for another 15 months.