Tax Harmonization in Ontario - The Big Grab
Boy, have I got a bone to pick with the Ontario government this week! Several, actually. Yesterday was my rant about proposed energy audits. Today I'm going to write about Sales Tax Harmonization, or as I like to call it, The Big Grab.
The Ontario Government has put up a page explaining their position and the 'benefits' of making this move, you can read it here. Pure propaganda, if I've ever seen it. What really ticks me off is that they have the nerve to use terms like: transparency, fairness, job creation, and economic growth. Hogwash.
So what's it all about? They're proposing a change to sales taxes in Ontario a la the maritime provinces. No more separate PST and GST, both would be rolled into one tax, the HST. A 13% tax on just about everything you buy, including services that aren't currently taxable provincially - like real estate commissions. On the surface it doesn't look that bad as there are some exemptions that will be continued. Things like books, children’s clothing and footwear, children’s car seats and car booster seats, diapers and feminine hygiene products will still be exempt. What they don't offer, though, is the things that will now be taxable at a higher rate. Things like new homes and real estate commissions.
Firstly, new homes. Now I don't sell new homes and I have absolutely no desire to get into the market, but many of you do buy these properties or broker them on behalf of clients. Did you know that the sale of some new homes will cost tens of thousands of dollars more under this new tax scheme? I can hear the arguments already, "There's a rebate up to $400,000 and a reduced rebate for homes between $400,000 and $500,000. What about that? Doesn't that make up for it?"
Not really, no. According to the Ontario Home Builders Association (OHBA), in a recently released leaflet, fully 41% of new homes sold in centers with populations over 50,000 people will be subjected to tens of thousands of dollars in NEW taxes. That has the potential to, dare I say will certainly, impact new home sales and construction activity in this Province. At a time when the economy is suffering, should one of our main economic drivers be hamstrung in this manner?
Now you might be tempted to think, "That's just NEW homes though; there won't be any other negative effects on the housing market." How wrong you'd be! If your house sells for $300,000 and you negotiated a commission of 5.5% with your REALTOR®, then the fee would be $16,500 plus taxes. Today that tax amount is just 5% or $825 - after the HST comes into effect your new tax burden will be $2,145! That's an increase of $1,320 or a 160% increase! And just where is that money supposed to come from? I feel for you, dear consumer, but my kids still have to eat - I can't justify just dropping my fees because the government passed a new tax.
The McGuinty government claims that the impact to most families shouldn't be more than $70 per year in increased costs. But don't worry, they're going to give you your own money back in the form of a $1,000 pay off. The McGuinty government claims that businesses will benefit because they'll now be able to more affordably buy new equipment to keep people employed manufacturing goods. There might be some truth in this one, and I applaud them for thinking about how to keep Ontarians working.
Just a few questions though, and feel free to comment below - I'd like to hear what you have to say:
The Ontario Government has put up a page explaining their position and the 'benefits' of making this move, you can read it here. Pure propaganda, if I've ever seen it. What really ticks me off is that they have the nerve to use terms like: transparency, fairness, job creation, and economic growth. Hogwash.
So what's it all about? They're proposing a change to sales taxes in Ontario a la the maritime provinces. No more separate PST and GST, both would be rolled into one tax, the HST. A 13% tax on just about everything you buy, including services that aren't currently taxable provincially - like real estate commissions. On the surface it doesn't look that bad as there are some exemptions that will be continued. Things like books, children’s clothing and footwear, children’s car seats and car booster seats, diapers and feminine hygiene products will still be exempt. What they don't offer, though, is the things that will now be taxable at a higher rate. Things like new homes and real estate commissions.
Firstly, new homes. Now I don't sell new homes and I have absolutely no desire to get into the market, but many of you do buy these properties or broker them on behalf of clients. Did you know that the sale of some new homes will cost tens of thousands of dollars more under this new tax scheme? I can hear the arguments already, "There's a rebate up to $400,000 and a reduced rebate for homes between $400,000 and $500,000. What about that? Doesn't that make up for it?"
Not really, no. According to the Ontario Home Builders Association (OHBA), in a recently released leaflet, fully 41% of new homes sold in centers with populations over 50,000 people will be subjected to tens of thousands of dollars in NEW taxes. That has the potential to, dare I say will certainly, impact new home sales and construction activity in this Province. At a time when the economy is suffering, should one of our main economic drivers be hamstrung in this manner?
Now you might be tempted to think, "That's just NEW homes though; there won't be any other negative effects on the housing market." How wrong you'd be! If your house sells for $300,000 and you negotiated a commission of 5.5% with your REALTOR®, then the fee would be $16,500 plus taxes. Today that tax amount is just 5% or $825 - after the HST comes into effect your new tax burden will be $2,145! That's an increase of $1,320 or a 160% increase! And just where is that money supposed to come from? I feel for you, dear consumer, but my kids still have to eat - I can't justify just dropping my fees because the government passed a new tax.
The McGuinty government claims that the impact to most families shouldn't be more than $70 per year in increased costs. But don't worry, they're going to give you your own money back in the form of a $1,000 pay off. The McGuinty government claims that businesses will benefit because they'll now be able to more affordably buy new equipment to keep people employed manufacturing goods. There might be some truth in this one, and I applaud them for thinking about how to keep Ontarians working.
Just a few questions though, and feel free to comment below - I'd like to hear what you have to say:
- If sales tax harmonization (STH) will 'only' cost $70 per year in new taxes, why are they willing to 'give' families $1,000 each? Could it be to buy them off? Could it be a bit of a carrot so that people don't complain? Who couldn't use a little extra money right now? I could. Baaaa.
- If STH will benefit business so much, why are they providing $4.5B in tax relief to businesses to offset the cost of new taxes? Could it be to buy them off? Could it be to provide the illusion of doing more for our manufacturers?
- They claim that consumer prices dropped in the maritime provinces by something just short of 2% after STH was introduced. Why then, do they estimate that it will cost consumers an extra $70 per year?
- What extra benefit does the hard working Ontarian get from this extra $70 per year in increased taxes? And don't tell me it's the $1,000 pay off! That's already your money! You just gave it to them in April when you did your taxes!
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