Ottawa is slamming the brakes on Premier Kathleen Wynne’s plan to hike the HST to fund public transit.

Late Thursday, Federal Finance Minister Jim Flaherty warned Ontario Finance Minister Charles Sousa that no increase to the 13 per cent tax would be permitted.

Flaherty said any scheme to raise the levy regionally in the Greater Toronto/Hamilton Area would violate terms Queen’s Park and Ottawa agreed upon when they harmonized the 5 per cent GST and the 8 per cent provincial sales tax in 2010.

“We did not lower the GST to have it taken away from Ontarians by the Wynne government with a new sales tax hike,” said Flaherty, who cut the federal levy from 7 per cent to 5 per cent prior to harmonization.

“As you are well aware, the Comprehensive Integrated Tax Coordination Agreement signed by the government of Ontario does not allow for the provincial component of the HST to vary between regions within the province,” the federal treasurer wrote.

“Any proposal to raise the rate of the provincial component of the HST within municipal or regional boundaries would contravene the agreement,” he continued in a letter obtained by the Star.

“Let me be clear, our government will not accept such a proposed regional sales tax increase on the residents of the Greater Toronto/Hamilton Area.”

The salvo is a blow to Wynne’s hopes to bankroll Metrolinx’s The Big Move and combat the gridlock that is hurting the Ontario economy by reducing productivity.

Sousa, whose Queen’s Park boardroom boasts a portrait of Flaherty from his brief stint as provincial treasurer a decade ago, was in New York promoting Ontario bonds.

His press secretary, Susie Heath, noted “Ontario has not made any requests of the federal government on this matter.”

“It is one of many recommendations made by the agency, on which we will consult with the public and municipalities,” said Heath.

“The province has asked repeatedly for the federal government to come to the table, through a national transit strategy and we hope we can get them to come to the table in a more substantive way,” she said.

Metrolinx emphasized the matter is “in the hands of the government.”

“We do acknowledge it would be difficult to apply the HST regionally,” said the agency’s Anne Marie Aikins.

“Any funds raised outside the Greater Toronto/Hamilton region would be used outside the GTHA.”

A 1 per cent increase to the HST is the cornerstone of the provincial agency’s transit investment strategy designed to raise $2 billion annually in the region toward 13 big-ticket transit projects.

Those include a downtown relief subway for Toronto, the electrification of some GO train lines and a Hurontario LRT in Mississauga.

One of four proposed transit taxes, a higher HST would raise $1.4 billion in the Toronto region but would net out at $1.3 billion after a mobility tax credit is applied to assist low-income residents.

It would generate $1.7 billion in the rest of the province. Both Wynne and Metrolinx officials have said that money could pay for local infrastructure priorities in those other areas if the 1 per cent were applied Ontario-wide.

A Toronto area commercial parking levy averaging 25 cents a day would generate $350 million a year.

A 5-cent a litre gas tax would raise $330 million and a 15 per cent hike in regional development charges would come up with another $100 million.

Loading... Loading... Loading... Loading... Loading... Loading...

In Monday’s report to the government on funding The Big Move, Metrolinx also recommended high- occupancy toll lanes, land value capture and parking fees at transit stations.

The tax package would average $477 per Ontario household annually but could cost a two-car family of five $977 a year, according to Metrolinx.

Read more about: