The P.E.I. government has plans to implement a harmonized sales tax effective April 1, 2013, Finance Minister Wes Sheridan announced in his annual budget address Wednesday.
As part of the implementation the provincial sales tax would be lowered to nine per cent, lowering the total sales tax to 14 per cent from the current 15.5 per cent.
While the tax will be lower, it is likely there will be far fewer exemptions under the HST. Sheridan committed to exemptions for home heating oil, children’s clothing and children’s footwear. Current exemptions from PST also include electricity, gasoline as well as adult clothing and footwear.
While prices will be going up on gas and electricity, Sheridan expects those increases will be mitigated somewhat.
Recent forecasts from Maritime Electric, for example, suggest base prices could go down in 2013.
As for gas, Sheridan said the province intends to lower the excise tax on gas at the same time as the extra nine per cent sales tax is added, in order to keep the price of gas on the low end of prices in Atlantic Canada.
"Our goal is to remain in a competitive position," said Sheridan.
Sheridan expects the price of gas will go up on April 1, 2013 between three and six cents a litre.
The broader tax base will mean more money raised from sales tax, said Sheridan.
He expects provincial revenues to increase by about $25 million versus the money currently raised by the provincial sales tax. The province will also receive $39 million in one-time transitional payments from Ottawa over the next two years.
The HST is also more business friendly, said Sheridan, because business-to-business purchases are not taxed. Sheridan said the experience in other provinces is that the HST encourages lower base prices and business growth.
The government is also introducing measures to lessen the impact on lower-income households.
An expanded rebate program will return $150 to $200 a year to households with incomes under about $55,000 a year.
"What that allows is low- and modest -income Islanders will pay no more tax in 2013 than they are paying today," said Sheridan.
About 30,000 of the 72,000 households in the province would be eligible for the rebates.