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Ontario is looking for more proactive ways to make businesses competitive so they can keep jobs in the province, including the merging of sales taxes, Premier Dalton McGuinty said Saturday.

While his emphasis in recent days had been on using green energy to create jobs in a troubled economy, Mr. McGuinty said he is now looking at harmonizing the PST and GST so seriously that a change may come with next month's budget.

“When I talk to economists and business people I usually hit them with: ‘What's the single most important thing that we could do to give you a bit more of an advantage so you can be more competitive and hire more of us?”' Mr. McGuinty said after a speech to Liberal party members in Niagara Falls, Ont.

“There seems to be an emerging consensus around harmonization.”

Mr. McGuinty hasn't completely committed to merging Ontario's provincial sales tax with the federal GST, but he said he's growing warmer to the idea after tentatively raising it last month.

He's also reaching out to Ottawa.

Merging the PST and GST would require co-operation with the federal government since it would reduce provincial revenues and increase the cost of household goods not subject to the provincial tax.

“Consumers will be affected by this, and our treasury takes a hit, in the billions,” Mr. McGuinty said. “That's the kind of thing we can only do with the support of the federal government.”

The federal Conservatives have long pushed Ontario to merge the two taxes, but the province had repeatedly shot down the idea.

Proponents acknowledge some prices could rise in the short-term, but they argue consumers would benefit in the long run because a single tax would lead to a much stronger economy.

Businesses pay both the eight per cent provincial sales tax and the five per cent federal goods and services tax on equipment and machinery, as well as on daily operating costs such as electricity. They can only claim a tax credit for the GST.

Quebec, New Brunswick, Nova Scotia and Newfoundland and Labrador have already harmonized their provincial sales taxes with the GST – with financial help from Ottawa.

In the case of the Atlantic provinces, the change more than doubled tax on gasoline, heating oil, privately sold used cars and other items in 1997. A study in Nova Scotia estimated consumers paid an extra $84-million in the first year.

Ontario's Progressive Conservative critic Tim Hudak said he would welcome changes to the provincial sales tax, which punish business investment.

“We need to ensure, however, this isn't going to put another weight on the backs of consumers already struggling with high taxes and high energy costs under Dalton McGuinty,” Mr. Hudak said.

“But bring a plan forward for goodness sake. We've been talking about this for years while we've lost over 270,000 well-paying manufacturing jobs in Ontario.”

Mr. McGuinty's main proposal to deal with the mounting job losses so far has been the Green Energy Act – legislation coming in the spring that he says will eliminate barriers that hold up renewable energy projects and help create jobs.

He has been rolling out a new plan to attack the economic crisis that cost Ontario 71,000 jobs in January alone, and warning that the province will face “multi-year” deficits starting with a “significant” shortfall in the upcoming spring budget.

In addition to a focus on renewable energy and healthy businesses, his strategy includes a push for higher education so people can move away from manufacturing jobs.

“We plan to proceed more aggressively than anybody else in North America when it comes to putting in place 50,000 new green energy jobs,” Mr. McGuinty said.

“We need jobs, we need to shut down coal-fired generation and we need to assume our full responsibility in the face of climate change.”