When Prince Edward Island introduces a harmonized sales tax (HST) on April 1, 2013, it will dramatically increase the province’s ability to compete worldwide, according to a new report.
P.E.I.'s planned sales tax harmonization will move the province’s tax competitiveness ranking from the 87th to the 19th most competitive among the 100 jurisdictions reviewed, says the Annual Global Tax Competitiveness Ranking from the School of Public Policy at the University of Calgary. The study looked at 90 countries in addition to the 10 Canadian provinces.
“The report confirms that the new tax system will put us in a position to attract and retain new businesses from all over the world,” said Finance Minister Wes Sheridan. “This report sums up our position that the implementation of the HST will help grow our economy and reach our goals of maintaining important services to Islanders while giving us the resources we need to balance our budget.”
The report analyzed each region’s business tax regimes and ranked them according to their marginal effective tax rate (METR), which is the amount of money a company must make in order to pay its taxes before turning a profit.
Accounting for next year's planned harmonization, P.E.I.’s METR is 10.8 per cent, compared to last year’s rate of 28.8 per cent. Of all the provinces, New Brunswick has the most favourable METR at 4.6 per cent, while British Columbia ¾ which does not have HST ¾ has the highest rate at 27.7 per cent.
“This has been the foundation of our plan to modernize the tax system,” Sheridan said. “As we do not have the resources available in other provinces, we have to rely on our most valuable resource: our people. And in order to make it possible for more Islanders to find fulfilling employment here at home, we need to make it more attractive for businesses to move here. The introduction of the HST makes the Island more attractive to business.”
Canada is the most tax-competitive country among the G7 countries, according to the report.
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