Loading ...Effective July 1, 2010, Ontario will implement a harmonized sales tax. What this means is that the 5% GST and the 8% PST that we currently have will be combined as one and become a 13% HST sales tax. Simple enough right? Well not exactly… What It Means for You the Consumer While the harmonized sales tax won’t change the price on many goods and services that get purchased on a day-to-day basis, some goods and services which are currently exempt from the PST sales tax will no longer be exempted: haircuts, tobacco, books/magazines, as well as professional services offered by lawyers, accountants and real estate agents. Items that are currently exempt from all tax will remain exempt from all tax. This includes items like staple groceries, prescription drugs and rent fees. Why Is Ontario Doing This? Any Benefits? The reason is because a harmonized sales tax is a lot more efficient than administering both a provincial and a federal sales tax. It will decrease the cost of exporting goods out of Ontario which in turn, will make Ontario more competitive with the other provinces which currently already have a harmonized sales tax. It will also hopefully lessen the effects that the recession has had on many industries. The Added Benefit for Entrepreneurs Under the new harmonized tax, businesses can now do the following:
Wait…Consumers Get a Tax Relief! Ontario has promised to provide tax relief as a result of this new tax to consumers. This benefits includes the following:
The Bottom Line CanadianTaxMan is a guest writer for Colourful Money. He specializes in taxation. For more information on CanadianTaxMan read his profile here.
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Posted under HST, Small Business
This post was written by CanadianTaxMan on April 30, 2009
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At the highest policy level, the HST on new homes runs directly counter to the province’s Places to Grow plan. The policy framework, built to encourage intensification and brownfield redevelopment with diverse mixed use/mixed price communities, is undermined by this tax policy. Neighbourhoods will skew toward smaller condo units and away from housing that is larger and suitable for families or near-retirement couples seeking to relocate from the suburbs to the core. The creation of complete communities providing housing options to meet the needs of people of any age – a core principle of the growth plan – will suffer a dramatic setback.
Yes, the new home under $400000 exemption will create an incentive for people to buy lower priced homes since the effective cost of those homes is cheaper due to the reduced taxes. It will be interesting to see some statistics once this plan goes into full force. My guess is that the effect this change will have on the housing market is that purchases of small homes and rentals will increase and purchases of large homes will decrease.
Interesting and very helpful, keep up with the useful financial articles.