HST changes

First off, what is the Harmonized Sales Tax (HST)? This is when you take the Canada-wide Goods and Services Tax (GST) and merge it with the Provincial Sales Tax (PST).

Ontario and British Columbia will join New Brunswick, Newfoundland and Labrador and Nova Scotia in merging the GST with the separate PST. The House of Commons, has voted in favour of the HST for British Columbia and Ontario.

The procedure is the Members of Parliament (MP) has to pass a "ways and means motion", amending the Excise Tax Act. This was done with the Liberals, Block Quebecois and Conservatives, supporting the motion which passed 192-32. The NDP opposed the motion.

The purpose is to try and reduce some of the tax that business is now paying, by having two separate taxes. If your company produces cabinets, then you will be paying PST for the materials that you buy from a wholesaler, who has also paid PST on the original materials. Some tax relief for business will make them more profitable. This money can be used for business investments and to hire more staff, and help relieve the unemployment situation.

There is concern that the end-users, the consumer, will end up paying more for the same goods. Statements from the Toronto Dominion Bank say that people in Ontario, will pay eight percent more on 19% of what they buy. In B.C. it will be seven percent more on 21% of what they buy. It works out to less then 1% as an overall price increase. Not every province will tax the same way. An example, is gas and fuel oils are not taxed in B.C., but they will be in Ontario - to a tune of 13%.

July 1, 2010, will bring some changes to the way taxation is done in Ontario. The provincial income tax rate will be reduced from 6.05% to 5.05%. This will result in approximately $10.6 billion in temporary and permanent tax relief, over a three year period. An example, is families who earn under $160,000, for example, will get three payments totaling $1,000, over the three years.

When the three Eastern provinces harmonized their sales tax in 1997, there was a small drop in overall prices. Inflation was slowed. Business used their new-found capital to invest in new equipment. Let us hope that it works as well for British Columbia and Ontario.