In two of Canada's most populous provinces residents are bracing, preparing and bemoaning Thursday's arrival of the harmonized sales tax.

Heidi Graw has decided that after years of feeling helpless as the cost of living climbs in British Columbia, she has had enough: she won't pay another tax.

Ontario residents protest the inclusion of fitness club memberships in the HST, which comes into force Thursday in Ontario and British Columbia. (Maria Babbage/Canadian Press)

As of July 1, when the new HST takes effect in B.C. and Ontario, Graw will boycott purchases of anything beyond the basics.

"We won't be going out to the restaurants, we won't be going to the movies, we won't be going to the rec centre, or all these other little frills," says the Mission, B.C., resident.

"That's the only way I can take control over how much tax I'm prepared to pay."

The HST merges the five per cent federal goods and service tax with provincial sales taxes of seven per cent in B.C. and eight per cent in Ontario. That means consumers will pay more for a variety of things, depending on the province.

For example, Ontarians will see higher heating bills, but British Columbians will pay slightly less thanks to a provincial rebate. Ontarians won't have to pay more for a bag of chips, but British Columbians will. Hailing a taxi will cost more in both provinces.

The cost of driving will go up in Ontario as gasoline sales face the new tax, but there's an exemption for B.C. drivers.

On July 1, a $100 golf game that used to set you back $105 after GST will now cost $113. A $20 haircut rises to $22.60 from $21, taxes included. In Ontario, a fill-up at the gas pumps will cost an extra $5 to $8 or so with the new tax.

Starting Thursday it will cost more to hail a cab in Ontario and British Columbia. (iStock)

Consumers will pay the new tax on about 20 per cent of purchases that had been PST exempt in the past — a main reason many consumers see the changes as a tax grab by government.

The new HST will siphon about $2.5 billion a year in additional taxes out of the economy and shift the tax burden to consumers from businesses. In Ontario, it could pile another $800 in annual costs on the backs of an average family, and critics say it could also spark further growth in the underground cash economy, as more and more consumers try to avoid the new charges.

But tax experts and economists generally back the changes, saying they reflect a 20-year effort by Canadian governments to modernize the tax system, cut corporate taxes and boost investment and trade in an increasingly competitive global economy.

Within a few years, they say, the economy will create hundreds of thousands of new jobs as businesses become more competitive and use HST tax breaks they can claim to boost exports, buy new technology or expand.

'I have been driven to the brink and now I'm just not going to participate anymore.'—Heidi Graw, B.C. consumer

Those arguments don't hold much water with Graw, who predicts her boycott will outlast the unpopular HST.

"I have been driven to the brink and now I'm just not going to participate anymore for as long as I can hold out," she says.

The 54-year-old bookkeeper has been canvassing on behalf of the Fight HST campaign in British Columbia, a drive led by former B.C. Social Credit premier Bill Vander Zalm.

They claim their petition has collected half a million signatures, far surpassing the 10 per cent quota of registered voters in every riding needed to potentially force a referendum to repeal the tax.

Tax experts support HST

The new regime streamlines paperwork for businesses, saving an estimated $125 per filing, and for the first time, refunds millions to businesses in input tax credits for provincial taxes.

The new tax system will attract about $47 billion in investment to Ontario, resulting in 591,000 jobs in 10 years, according to a report by economist Jack Mintz. His report on B.C. finds that province will see $11.5 billion in investment and 113,000 jobs by the end of the decade.

Effective July 1, a $100 golf game that cost $105 under the GST will cost $113 under the HST. (iStock)

But for recession-battered consumers, the tax is just the latest new cost in an era of high home prices, rising interest rates, and a looming era of government restraint needed to wipe out Canada's federal and provincial budget deficits.

"We have to recognize the fact that there is a lot of anger, a lot of frustration on the part of the public," says B.C. Finance Minister Colin Hansen.

Ontario Revenue Minister John Wilkinson believes Ontario residents are more accepting because they understand the HST is part of a larger tax reform package that also includes income tax cuts, new tax credits, and transition cheques of up to $1,000 per household.

The Ontario government has estimated that 51 per cent of families will pay more in taxes under the HST, as much as $480 more a year by 2012 for households that earn between $150,000 and $300,000.

Canada is the only country in the OECD to impose both a value added tax and a retail sales tax, and is one of two countries, along with the U.S., to maintain a retail sales tax at all, according to a report from the Fasken Martineau corporate law firm.

But Canada has been particularly slow to adopt an HST — likely due to our provinces' historic reluctance to cede authority to the federal government, said Andrew Dunn, senior tax partner at Deloitte Canada.

Quebec was the first province to heed the federal government's call to incorporate provincial taxes when the GST was introduced in 1991.

B.C. Finance Minister Colin Hansen attributes widespread anger over the HST to bad timing and miscommunication. (Darryl Dyck/Canadian Press)

However, Quebecers phased in the harmonized system and maintained some control over tax collection. B.C. and Ontario are turning that job over to the Canada Revenue Agency, which will return the provincial portion to the regional governments.

The Atlantic provinces implemented a harmonized structure in 1997 after the federal government agreed to provide $1 billion in transitional assistance to each of New Brunswick, Nova Scotia, and Newfoundland and Labrador.

Ontario and B.C., two of Canada's largest economies, had been major holdouts in converting their tax structures. But they began to re-examine the regime when the recession hit their economies.

Ontario lost thousands of manufacturing jobs and B.C.'s forestry industry was devastated. The provinces racked up huge deficits to stimulate the economy and now need to generate revenue to pay down their debt.

The three remaining PST provinces, P.E.I., Manitoba and Saskatchewan, are likely to come around to the HST shortly, lest they too lose out on more investment dollars. And a decade from now even Alberta, which doesn't have a PST, will jump on board, Dunn predicts.

Experts compare the HST implementation process to the GST experience in 1991. In 10 years, Dunn says, not only will people be accustomed to paying the tax, rates could be even higher.

Consumption taxes around the world range between 20 and 25 per cent in many countries.

Graw doubts whether the new harmonized sales tax will live to see her 55th birthday — in October.

She believe her boycott and the voices of her fellow "high-spirited" British Columbians will force politicians to kill the HST in its infancy.

"I'm going to live as frugally as possible, which doesn't do local business any good," she says.

"But hey, we've got to get things in line here and make this province more affordable to live in, and sometimes you have to pull things apart to rebuild."