OTTAWA — Finance Minister Jim Flaherty insisted Friday he is not raising new taxes on financial services, saying reports to the contrary are misplaced.
With cries of foul shouted in the House of Commons, the finance minister moved to stem fears that his department is applying a new definition of financial services that would see the five-per-cent GST applied to a whole new range of transactions.
With the harmonized sales tax coming into force in Ontario and British Columbia, some suggested the tax grab on the financial services sector could reach $1 billion a year.
“There seems to have been some confusion,” Flaherty said in Oshawa, Ont., on Friday.
“The intention in the Department of Finance has been to clarify the definition of financial services because of a couple of court cases that seem to have muddied the waters. There’s no intention of changing tax policy.”
An official said there would be no expanding of categories that would see the sales tax applied to areas that previously were not subject to taxation.
“This is longstanding Government of Canada policy with respect to the definition of financial services. It was the policy of the previous government, it’s our policy as well. We are going to maintain that definition and take whatever steps we have to make it absolutely clear that the longstanding definition remains the same,” Flaherty said.
Asked if he was giving an assurance to the services industry, Flaherty replied in the affirmative.
“That’s the reassurance we want them to have. We will have the tools in the first budget implementation act to make sure we get back to the status quo before the court cases so people can rest assured that the tax treatment of defined financial services will not change.”
The controversy was a focus of opposition attacks on the government during question period Friday.
Liberal MP Wayne Easter accused the Conservatives of a “conniving deception,” saying since financial services firms will pass on the tax hike, consumers will ultimately wind up paying.
Flaherty’s parliamentary secretary Ted Menzies responded that the new provisions in the budget were “simply technical clarifications to a court case.”
Ottawa had announced in December that clarifications on how the GST would be applied on financial services were coming as a result of the court decisions.
The industry became alarmed about just how much they would affect services following a Canada Revenue Agency note that left the door open to many more activities being subject to the sales tax, including commissions paid to mutual fund dealers and to auto dealers to arrange credit for car buyers.