Economy
Harmonized tax
HST: a hot-button issue for the Conservatives?
Last Updated: Wednesday, October 7, 2009 | 11:10 AM ET
By Leslie MacKinnon, CBC News
With harmonized taxes, prices for dry cleaning, utilities, airfares and more will rise by eight per cent in Ontario and seven per cent in B.C. (Steven Senne/Associated Press) The prime minister has made it clear he believes there are no good taxes. But the federal government has had its hand in a substantial tax increase that's coming to residents of Ontario and B.C.
After July 1, federal and provincial consumption taxes will be combined into one harmonized tax, or HST, in these provinces, meaning some services that previously were only taxed with GST will now be hit with PST, too.
Prices for haircuts, dry cleaning, utilities, airfares and much, much more will rise by eight per cent in Ontario and seven per cent in B.C. In Ontario, a $20,000 home renovation bill that used to cost $1,000 extra in GST will rise to $2,600 in HST after Canada Day.
Prime Minister Stephen Harper said Tuesday during question period that his government believes that sales taxes should come down, which is why the GST was lowered (Canadian Press) Many people in B.C. are already outraged by the planned imposition of the HST, largely because Premier Gordon Campbell just won his third majority by promising, among other things, no new taxes. In Ontario, many people seem completely unaware of the substantial tax hike that's going to hit them come July 1.
The federal government is ardently hoping the backlash from the HST will be directed toward the two provincial governments. Prime Minister Stephen Harper said Tuesday during question period that his government believes that sales taxes should come down, which is why the GST was lowered.
But the fact is the federal government is aiding and abetting the provinces. It plans to pay B.C. and Ontario almost $6 billion to ease the transition to the HST. The offer of significant cash is open to any other province. (Three Atlantic provinces have had the HST since 1997, and Alberta has no PST).
And why are some governments, and many economists, for that matter, so keen on the HST? The case is made that the HST is good for the economy since businesses, which currently can't claim tax credits for the PST paid on their purchases, will be able to under the new system. The money they save will be passed on to the consumer in lower prices, so everybody wins, the argument goes.
But the reality is that consumers end up paying more. Yes, prices will come down, but not enough to offset the increase consumers will pay in new tax. TD Bank Financial Group estimates that the HST will inflate prices for consumers by an average 0.7 per cent. That's not a monumental amount, but bound to hurt some people in an era of low wage increases and tighter household budgets.
The question is, how long can the Conservatives avoid taking any blame for the tax bite that's coming to about half the population of the country? One test will be the day the government has to introduce the federal enabling legislation that will allow the HST to go ahead.
The NDP is actively campaigning against the HST and will not support the government on this one. The Bloc Québécois's vote is harder to call, and as for the Liberals, well, they're in a quandary. They've vowed not to support this government, yet they've guaranteed Ontario Premier Dalton McGuinty that they will not impede the HST for Ontario.
Stay tuned, because this could be the vote that has the explosive potential to bring down the government and force an election.
And one other thing: If you live in Ontario or B.C., and if you foresee an expensive house renovation, a brake job on your car, or any other pricey service — maybe a big legal bill — make the payment before July 1.
