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Tory MP breaks ranks on HST Add to ...

Cracks appear to be forming in Prime Minister Stephen Harper's Conservative caucus over a controversial plan to harmonize Ontario's sales tax with the federal GST.

A federal Tory is trying to distance himself and his government from the plan, saying the province is to blame for bringing in a single tax - a move some critics have labelled a giant cash grab.

Many of his constituents in Bruce-Grey-Owen-Sound have "concerns" about tax harmonization, which British Columbia is also pursuing, MP Larry Miller said in an opinion piece published last week in the Owen Sound Sun Times.

"First, I want to make it clear that this was a change initiated by the province of Ontario and was not a decision made by the federal government in any way," he wrote.

Mr. Miller's comments seem to put him at odds with federal Finance Minister Jim Flaherty, who has praised Ontario for making the move and has openly encouraged other provinces to do the same.

Earlier this month, Mr. Flaherty called tax harmonization a "solid" policy that will create jobs and grow the Canadian economy in the long run. He even offered to cut the remaining holdout provinces a cheque to ease the transition if they agreed to harmonize the taxes.

Ottawa is already kicking in $4.3-billion to help Ontario adjust to the tax change, which will increase the cost of many items currently exempt from the provincial levy. British Columbia will receive $1.6-billion.

Mr. Miller did note in the Aug. 11 article that while "we are all concerned about the impact of the tax changes, there appears to be some positives to this change that should benefit Ontario businesses."

It will cut down on red tape, reduce taxes and make companies more competitive internationally, he said.

It was a difficult decision for the province to make, but Ottawa made it easier by offering compensation, Premier Dalton McGuinty said Wednesday.

"What made it more feasible was the agreement we entered into with the federal government to provide us with financial support, which we intend to pass on to our families and our small businesses to help them adjust to the single sales tax," he said.

"So we initiated it, I think that's fair to say. And we had a good, productive conversation with the federal government that enables us to move ahead."

Mr. McGuinty's Liberal government, which announced the change in its March budget, hopes to ease consumer pain and minimize the political fallout by offering cheques of up to $1,000 to families and individuals when it merges the taxes next July.

The last cheques will be in mailboxes just a few months before the next provincial election in October of 2011.

Nova Scotia, New Brunswick and Newfoundland and Labrador harmonized their sales taxes with the federal GST more than 10 years ago. Quebec partially harmonized its sales tax system and Alberta has no provincial sales tax.

That leaves Saskatchewan, Manitoba and Prince Edward Island as the remaining holdouts.

Tax harmonization became politically toxic for some governments when consumers ended up paying more for goods that were previously exempt from the provincial tax.

The public uproar over harmonization in Nova Scotia contributed to the Liberal government's defeat in 1999.

Former Saskatchewan premier Grant Devine, who harmonized sales taxes in 1991, was defeated in the next election by the New Democrats, who split the taxes up again.

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