Harmonized Sales TAX Lacks Harmony

July 1st will mark the introduction of the new Harmonized Sales Tax (HST) which will spell an increase of 8% to all Home Renovations. That means for example on a job that now costs $3500 ($3675 with GST included) will cost now cost $3955 with HST included. That is a significant difference of almost $300 just because of the HST and now you are paying almost $500 total in Tax! Yikes! That’s quite an increase. Well, I guess the Ontario government has some kind of crazy plan which “they believe will jolt an economy emerging from recession”. I don’t believe it, I just think that it’s a way for the provincial government to better line their pockets to avoid future deficits.

HST-150x150According to Cyndee Todgham Cherniak, a trade and tax lawyer at Lang Michener in Toronto, said the move to harmonize the taxes starting in July, 2010, is nothing more than a “cash grab” by the McGuinty government. While it’s good for manufacturers, because it eliminates some embedded costs related to the PST, she worries harmonization will negatively affect many small and medium-sized firms that provide services, such as accountants, architects, engineers, graphic designers and commercial artists. She said the additional tax will hurt the competitive advantage Ontario’s services industries have had and could drive business to jurisdictions that don’t charge PST on services, such as Alberta.

“It will increase offshoring,” such as call centres, she said. She also noted that Ontario has “one of the largest graphic designer [communities] in North America. We might lose some of our competitive advantage in that industry.” Another area where she sees harmonization having a particularly negative effect is nursing home operators and builders, whose clients will have to pay more and might not be able to afford it. She is also worried there will be “another form of underground economy in Ontario created,” similar to the way the implementation of GST on services created problems in a number of business areas, particularly the home renovation market, which governments still grapple with 18 years later.

The bottom line is that the Canadian Government through Homeowners a bone when it announced the Home Renovations Tax Credit program, but now if you live in Ontario and did take advantage of that program eventually you will end up giving all back to the Government.

We are almost one month away from the HST being a fact of life, so I am strongly urging Homeowners to act now and save the 8% because it really makes a difference especially if major work is needed.

Masters, Mark. “HST Gets Mixed Reviews in Ontario.” National Post | Canadian News, Financial News and Opinion. Web. 27 May 2010. .

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