Critics are crying foul after provincial tax collectors hit the HST jackpot.

Ontario's 1,251 collectors are each receiving up to $45,000 in severance pay as their jobs transfer from the provincial ministry of revenue to the federal equivalent.

Displaced employees are being offered jobs with the Canada Revenue Agency because collecting the 13 per cent harmonized sales tax will be a federal responsibility. The HST, which blends the 8 per cent provincial sales tax with the 5 per cent GST, comes into force July 1.

In British Columbia, where the HST also comes into force in July, provincial tax collectors who accept a transfer to the federal government will not get severance pay.

The Ontario payouts had the Progressive Conservatives on their feet in the Legislature on Thursday.

Tory MPP Ted Arnott (Wellington-Halton Hills) demanded to know why employees were receiving a "hefty-six-month severance package" for changing job titles.

"They're not going to miss a day of work, and they're being paid up to $45,000 to change their business cards," he said.

Premier Dalton McGuinty defended the severance from Listowel, Ont., where he was making an announcement, saying the government is bound by the terms of the employees' collective agreement.

"There is an agreement in place. I think we have a responsibility to respect those contracts," McGuinty said.

"I guess the alternative is we could introduce legislation in the House and say, `You signed a deal and we signed a deal, it is no longer convenient for us to respect that deal.' So, where does that take you?"

Government officials can't just change their mind whenever they feel like it, McGuinty added.

About $25 million has been set aside for severance costs, assuming all the employees take the transfer, said Leslie O'Leary, press secretary to Revenue Minister John Wilkinson.

Ironically, the Tories introduced the clause that provides for severance pay when premier John Robarts was in power in 1970 – a fact that had Liberal Finance Minister Dwight Duncan chortling.

"It's an interesting position that he takes today, having had a Conservative government put that clause in the collective agreement and now saying that we shouldn't honour it," Duncan said.

News of the payouts comes as Ontario tries to come to grips with a record $24.7 billion deficit – a process McGuinty has said will see him approach public-sector unions for co-operation.

The tax collectors belong to the Ontario Public Service Employees' Union (OPSEU) and the Association of Management and Professional Crown Employees of Ontario.

The government is just following the terms of the collective agreement, said Greg Hamara, an OPSEU spokesman.

"Our members are losing their jobs. That is a termination," he said.

The severance is equal to one week's pay per year for up to 26 years of service.

The collective agreement covering the tax collectors who belong to OPSEU came into force Jan. 1, 2009, and runs for four years. The government announced the HST in its March 2009 budget.

Hamara added the members will be losing their seniority when they move to the revenue agency.

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"When the inevitable job cuts Prime Minister Stephen Harper is threatening come, it is potentially our members who could be affected," he said.

That differs from British Columbia, where Graham Currie, spokesman for the B.C. Ministry of Finance, said the agreement signed with provincial employees matches them to a position in the federal government where they will receive similar salaries and keep their seniority in terms of job security.

Erin Sikora, a spokeswoman with the B.C. Government Employees' Union, said the collective agreement signed in 2006 does not require severance for employees transferred to another employer.

"It's quite different here in than in Ontario. Our collective agreements are different," said Sikora. "There is no severance for transfers."

Outside of question period, Duncan defended the payout and blamed it on the work of "successive governments in Ontario."

"We had to follow the provisions of the collective agreement that have been in place for many, many years," he told reporters.

The employees were not guaranteed jobs but federal government officials found spots for everyone. "To their enormous credit, and I want to give them credit publicly, they did that," he said.

There have been numerous opportunities to take this provision out of the collective agreement but it was never done, Duncan said. Many of the employees entitled to the payout live in areas such as Durham Region that have been hit hard by the recession, he added.

The employees will be offered jobs in a revenue office close to home, said O'Leary.

Those who accept the job offers will join the federal agency in two groups – the first in November, and the second group on March 1, 2012. They won't miss a day of work because they are scheduled to start with the federal agency immediately after their last day of employment with Ontario.

The tax collectors can opt to stay with the Ontario public service. But those who do so will not get the severance, said O'Leary.

With files from Petti Fong

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