Family doesn’t buy that HST is a good thing | #Toronto #Ottawa

Family doesn’t buy that HST is a good thing TheSpec.com – Business – Family doesn’t buy that HST is a good thing

Shopping with the Cleavers: Costs that change on July 1

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The Hamilton Spectator

The harmonized sales tax kicks in on Canada Day. We’ve heard it’s going to cost more to get the car filled, get a haircut or get a massage, among other things. Ontario Finance Minister Dwight Duncan says the HST will be good for the economy. The Opposition says it will hurt families and add trouble to a still-struggling economy. How taxing will the HST be? How will it affect the average family? We went to the real experts — a family like the Cleavers — and asked them. Here’s what we found.

The HST “transition payment” cheques this year are nice but when all is said and done Nicole Cleaver would rather not have the tax at all, thank you very much.

“I haven’t received my cheque yet but it won’t make much difference,” said the Hamilton mother of two. “I don’t see how this is going to create jobs.”

Many share her view.

Ontario Finance Minister Dwight Duncan admitted it’s difficult to explain how a tax, let alone a consumer tax, will create a solid economy.

“It’s counterintuitive,” he acknowledged. “The (province’s income) tax cuts get lost when you’re talking about a consumer tax.”

The HST comes into effect on July 1 in Ontario. This means that both the 5 per cent GST and 8 per cent PST will be combined and applied to some new goods and services.

Duncan said the government decided to go ahead with the value-added tax after consulting with economists about the need for tax reform.

He said taxing consumer behaviour rather than income is better for the economy.

In theory, it means more jobs (the government estimates up to 590,000). Also, with the removal of the embedded PST at many levels in the supply chain, manufacturers will pay less in tax, and savings will be passed on to the consumer.

Also, businesses predict they’ll save billions in administration costs by only having to file one tax.

Several provincial and federal think-tanks and organizations back him up. The Ontario Chamber of Commerce estimated a $5-billion savings for business will pass through as savings to consumers.

John Dolbec, president and CEO of the Hamilton Chamber of Commerce, said the tax reform package is “a tremendously good thing.

“This is the biggest reduction of corporate taxes in years. It’s a significant windfall for businesses.”

Dolbec said the Chamber alone will save $8,000 this year in the six months that the HST will be in place.

He said much of the savings comes from removing the PST on goods they purchase. He said big industry winners are construction and manufacturing while he concedes that real estate, in particular, may experience some challenges due to the HST applied to real estate fees and new homes worth more than $400,000.

But he said part of the reason for the opposition to the HST is due to its complexity.

“It takes two minutes to demonize the HST and two hours to explain it,” said Dolbec.

But such talk draws skepticism, to put it lightly.

“We think now is not the time, and if they were going to do it they should have at least (lowered) the provincial sales tax by one or two per cent as they did in Atlantic Canada,” said Kevin Gaudet, Ontario director of the Canadian Taxpayers’ Federation. He said the HST rollout comes too soon after the deep recession last year and that if the HST was to be introduced at all, it should have been when “the economy was hot.

“It benefits big business and hurts regular consumers.”

 

What is the HST?

The HST is a new harmonized sales tax that combines the 5 per cent federal GST and Ontario’s 8 per cent sales tax. It will be collected by the federal government, which will in turn rebate the province according to its previous tax rate. It comes into effect on July 1 in Ontario.

 

What other provinces have an HST?

* Newfoundland, Nova Scotia and New Brunswick implemented the HST in 1997.

* Alberta does not have provincial sales tax but does administer the 5 per cent GST.

* British Columbia is implementing the HST on July 1, too.

* Quebec has a value-added tax.

* Yukon, Nunavut and the Northwest Territories only charge GST due to the high cost of living in the Far North.

* Only Saskatchewan, Manitoba and P.E.I. will have sales taxes separate from the federal GST.

 

Long-term impact?

Both governments expect the HST will help create a more solid economy: generating jobs and helping businesses compete.

Duncan said any discussion of the HST should include mention of the provincial income tax cuts.

But Gaudet disputes that — suggesting that in reality, provincial income tax cuts and credits are scant — that only those in the lowest income brackets have had a cut, and even then, he estimates it’s only 1 per cent.

“They should have introduced this after some meaningful, broad-based income tax cuts,” argued Gaudet.

But government literature suggests 93 per cent of Ontarians will get a personal income tax cut.

The Cleavers, for example, are one of the 1.5 million Ontario households with an annual income of between $40,000 to $80,000 for which the HST should be “neutral,” given the income tax cuts.

But right now, to Nicole Cleaver, who is cutting back while trying to make do on maternity leave, it feels anything but neutral.

“I’m concerned about the extra fee on some of the utilities,” she said. “I’m just trying to find out now what’s affected.”

A random, unscientific look at expenses such as T-ball registration, camping fees, a used van and energy bills for her family before the HST and after shows they’ll pay $844.72 more — nearly three months’ worth of groceries — in HST on those items alone.

She’s worried about what it means for her financial investments. And as for the confusion, it’s no wonder.

The Ontario government’s website on the HST (www.rev.gov. on.ca/en/taxchange/taxable.html) indicates there will be no HST applied to financial services.

However, Leslie O’Leary, press secretary to Ontario Minister of Revenue John Wilkinson, said while financial services (including the acquisition of mutual funds), are exempt from the GST for the investor, some fees will have HST applied.

“Fees charged by financial advisers for advice or portfolio management are generally subject to GST and will be subject to HST,” O’Leary replied in a statement.

There are also myriad exceptions and applications in dozens of footnotes. In addition, economists differ on how long it will be before regular consumers will see the “benefits” of the tax reform package — some suggest a few months, while others suggest a few years.

Back in Hamilton, there’s not much the Cleavers can do about it. Nicole said they’ll need to buy a used vehicle next year when she heads back to work, but for now, it’ll have to wait.

The chamber’s Dolbec is optimistic the tax boost will enable businesses to reinvest and “after a few months, people will realize the benefits (of the HST).”

Cleaver is more wary.

“I think we’ll be more used to it — but we’ll be aware of it.”

 

What’s affected?

Ontario consumers already pay PST and GST on many goods and services. Because the HST is a combination of those, not much is affected.

There are also a few exceptions to any tax. For example, the new tax will not affect basic groceries, child care, new cars, car insurance or cable and phone services.

However, HST will apply to:

* karate, ballet, hockey and other sports registrations or lessons — up 8 per cent (programs run by a municipality aimed at youth under 14 are exempt)

* haircuts and massages — up 8 per cent

* theatre tickets — up 8 per cent

* energy bills — up 8 per cent

* new homes with pricetags of more than $400,000 — up 8 per cent (but will be eligible for the new housing rebate of up to $24,000)

* hotel rooms — up 3 per cent

* gas and diesel — up 8 per cent

* resale of cars — up 5 per cent

* real estate commissions — up 8 per cent

* tobacco — up 8 per cent

* funeral services — up 8 per cent

For more information, go to rev.gov.on.ca and click on the HST links.

lmarr@thespec.com

905-526-3992

Posted via web from Toronto Real Estate News, Blog

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About Tariq Sultan
Dear Readers, I am a dedicated Toronto, Ontario based real estate professional who has been successfully meeting and exceeding the needs of his clients for past several years. I am actively involved in the insurance, financing, and mortgage industry. Real estate is not only my career – it is my passion. I strive to continuously provide my clients with exceptional service to ensure they are fully satisfied when it comes to their real estate needs. For any real estate related inquires contact me today, I will be happy to assist you. Best wishes, Tariq Sultan

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