Ontario's finance minister cool to idea of municipal sales taxes

Ontario's finance minister has appeared to pour cold water on the idea of sharing sales tax revenues with the province's municipalities — including the cash-strapped City of Toronto. 

Peter Bethlenfalvy made the comments at the Association of Municipalities of Ontario (AMO) conference in London on Tuesday.

During a question and answer session with civic politicians, the minister was asked about the possibility of providing revenue from the harmonized sales tax (HST) to municipalities across the province. The question came after Toronto city staff floated the idea creating its own municipal sales tax, which would be applied separately from the HST but would require sign off from Premier Doug Ford's government.

Bethlenfalvy seemed cool to the idea.

"As you know, our government is not in favour of tax increases. There may be a time. Not now," he said. "A lot of people are hurting in this province and we have to work on the various things the citizens want."

Toronto faces $1.5 billion in budget pressures this year and last week city staff released a long-awaited report outlining possible new taxes and fees to address the problem. Included in the plan is a staff recommendation to ask the Ontario government for permission to levy a one per cent sales tax charged in Toronto in addition to the HST. 

Bethlenfalvy's office did not immediately respond Wednesday when asked for clarification of his remarks.

City committee to debate new 'revenue tools' this week

Mayor Olivia Chow's office did not immediately comment on the minister's remarks. Her newly-formed executive committee is preparing to debate the new "revenue tools" at a meeting Thursday. 

On Monday, Chow said she hadn't heard from either the province or the federal government about any of the measures proposed in the city report, including the sales tax. But she signalled the city is open to measures other than the sales tax, so long as they "grow with the economy," she said.

"It's up to the provincial and the federal government to say, 'Yeah, we think we'll pick that,'" she said. "We don't want to be prescriptive."

"What is encouraging, though, is no one has said 'No'," she added.

Asked last week if the province would allow the city to levy a sales tax, a spokesperson for the premier's office did not answer directly.

"Our government is focused on keeping costs down for people, especially at a time when the cost of living is going up," Caitlin Clark said.

Federal government has 'fiscal powers,' Bethlenfalvy says

On Tuesday, Bethlenfalvy said the province is awaiting the results of audits of six municipalities, which were launched this year to determine the financial impact of the elimination of some development charges on municipalities. 

He also stressed that the federal government has "fiscal powers" and could offer more assistance to Ontario municipalities.

"We need the federal government on some things like the HST, because they govern the HST," he said.

"There are some things we can't do unilaterally." 

The recommendation to pursue a city sales tax was one of a slew of new measures included in last week's Toronto staff report aimed at easing a projected $46.5 billion in budget pressures over the next decade.

The document paints a dire picture of the city's financial future without significant new revenue tools and additional assistance from the province and Ottawa as it tries to dig out from the COVID-19 pandemic. The city faces an "unprecedented financial crisis" that if left unaddressed threatens its fiscal foundations, the report said.

"There will be devastating consequences for the City of Toronto and the greater region and country without serious attention given to address the city's financial challenges," the report said, noting the region accounts for 20 per cent of Canada's gross domestic product (GDP) and 53 per cent of Ontario's GDP.

Measures the city could quickly pursue under its own authority, according to the report, include progressively higher rates of land-transfer tax on homes that sell for more than $3 million and increasing the existing vacant homes tax from one to three per cent, both pledges Chow made during her recent mayoral campaign.

City staff estimates a municipal sales tax would generate between $800 million and $1 billion annually, but would require the province to amend the City of Toronto Act.