What Ontarians Need To Know About HST

Controversial Policy Takes Effect July 1, 2010

Ontario is harmonizing its sales taxes. This article will tell people what they need to know about the controversial new policy before it takes effect on July 1, 2010.

The current government first floated the idea prior to the last provincial budget in March 2009. The policy would see Ontario combine its Provincial Sales Tax (PST) with the federal Goods & Service Tax (GST). The PST rate is 8% while the federal G.S.T. is sitting at 5%, meaning the combined total will be a 13% tax.

New Harmonized Sales Tax To Make Ontario More Competitive

The federal government has been pressuring various Ontario governments to take this step for some time. Provincial officials within the finance ministry argue the new combined sales tax will make Ontario more competitive around the world as a place to do business. They say it will also reduce the cost of Ontario-made goods, and because of this, it is going to give the manufacturing sector a much-needed boost.

A second part of the argument is it will reduce business costs. Right now, business owners can’t deduct PST from the cost of products purchased for business, so they end up passing it onto consumers. Under the new Harmonized Tax (HST) business will be able to deduct it, and ideally, pass on the savings to consumers. Estimates place savings for business at approximately $1.6 billion annually.

Progressive Conservatives, Building Industry Oppose HST

Traditionally, the HST is Conservative economic policy. But Ontario’s Progressive Conservatives (PC’s) are leading the fight against the HST, placing them in direct conflict with their federal counterparts. In recent remarks to the Canadian Press, their leader, Tim Hudak said they were “on the side of Ontario families and businesses who see it for what it is: a calculated tax grab.” In the same article, his New Democratic Party (NDP) counterpart Andrea Horwath agreed, calling it: “the wrong tax, at the wrong time.”

It isn’t just the political parties at Queen’s Park who are opposing it. The new policy is facing some stiff opposition from the building industry. Estimates say the new harmonized sales tax will add: $46-58 thousand to the cost of a house.

$10.6 Billion Tax Relief Incentives To Help With Harmonization

The Provincial government is going to offer some tax relief to help Ontarians with the new tax. Over the next three years, the McGuinty government plans to offer a total of $10.6 billion in incentives.

According to CBC.CA, these incentives include:

  • $1.1 billion in personal income tax cuts
  • An exemption for new homes under $400 thousand
  • Cash payments of $1,000 for families earning less than $160, 000
  • A permanent, non-refundable tax credit for low to middle-income adults and children
  • An enhanced property tax credit for low and middle-income homeowners and tenants

What Goods Are There Going To Be HST On?

Goods ranging from rent and condo fees to resale homes, prescription drugs, and medical devices will remain exempt from both PST and GST. New items being taxed include everything from haircuts and gasoline to taxi fares, newspapers, and magazines. Those who provide professional services such as lawyers and real estate agents will have to charge HST on their commissions.

The Harper government has offered $4.3 billion to aid in the policy’s implementation. Ontario will become the fifth province to harmonize its sales taxes, when the policy comes into effect July 1, 2010.

Ontario Reveals $8 Billion in Green Energy Projects

Ontario has revealed plans for $8 billion in Green Energy Projects. The additional money will fund projects in 86 communities, and create 20 thousand jobs.

The funding is the latest step towards the McGuinty government’s plan to introduce greener forms of energy to Ontario’s power grid. In January 2010 the Premier signed a $7 billion deal to give a consortium led by Samsung preferential treatment.

Green Energy Projects to Create 20 Thousand Jobs

The money will fund 184 approved projects, including 86 community and aboriginal communities. All of this is in addition to the 510 medium projects announced in March 2010. Combined the projects will create 2500 megawatts of power for the power grid. One of the major wind projects is located on-shore in Clarington Ontario, and three solar projects in the Cornwall area.

The advancements will make the province a green energy leader according to Premier Dalton McGuinty’s comments to CBC.CA that:

“We have practical, aggressive policies to secure green energy generation, research, and manufacturing, which will create good jobs in a growing industry.”

The projects are intended to create 20 thousand jobs. The addition of green energy is expected to add an additional $5 to Ontarian’s hydro bills by the end of this year. Energy Minister Brad Duguid in comments published by CTV.CA urged us to look to the future, “Right now, and in the past, we’ve been producing energy at the expense of ourselves and our children. This is an opportunity for us as a generation to help clean up our air, to help provide a healthier future for our children. The provincial government argues the green energy plan can create up to 50 thousand jobs.

New Democratic Party Responds to Green Energy Announcement

The New Democratic Party (NDP) responded to McGuinty’s Energy plan. They argue the province can create more jobs if they bypass nuclear and gas-fired technology in favor of more green technology.

In comments published by the Canadian Press, Energy Critic Peter Taubins urged the government to move away from it:

“That’s where the action has to come, moving away from those sources, and putting a lot more of our eggs back into the efficiency and conservation basket.”

The NDP argues it would be cheaper to do this as well. In order to afford its Green Energy initiatives, the Liberals have passed some measures of their own. Recently the McGuinty government passed a measure adding an additional $4/ year to hydro bills. Additionally, Ontario Power Generation (OPG) is seeking a rate increase to 9.6% or an additional $2.75/month. The measures are intended to reduce the $53 million cost of the strategy.