The cheque is in the mail.
But it’s going to take more than a one-time payment to ease the suspicion consumers have that the new harmonized sales tax isn’t going to cost them extra.
Starting July 1, Ontario and British Columbia will both implement a new harmonized sales tax to replace the GST and provincial sales tax. The HST will be applied to a host of new services that have never faced provincial taxes before.
The only provinces now without an HST are Manitoba, Saskatchewan and Prince Edward Island. In Nova Scotia, the HST will rise from 13% to 15% on Canada Day.
For Ontario and B.C. residents, everything from real estate services to cemetery plots to hair cuts will suddenly face the new tax. While the theory is HST will reduce business costs — and ultimately prices –many are not convinced.
“The government is giving rebates to people to assist them,” says David Schlesinger, head of indirect tax at KPMG.
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The HST assistance is temporary, however, because it is expected that as businesses save from their own tax exemptions and a centralized collection system, the savings will be passed on to consumers.
“Prices will get lower over a period. We can all be cynical about that, but the reality is prices will go down, especially in a competitive marketplace,” says Mr. Schlesinger. “The ideology of the rebate is to allow for the period of time before those savings get pushed down in prices and to have a little more money in consumer pockets.”
In Ontario, single people making less than $80,000 are eligible for three $100 rebate cheques. Single parents and couples with less than $160,000 in net income collect $330 this June and then payments of $335 in December, and in June, 2011.
In British Columbia, individuals with incomes up to $20,000 will receive a $230 HST credit, and families with incomes up to $25,000 will receive a $230 HST credit per family member. About 1.1 million British Columbians will benefit from the credit.
Most items, like cars, computers and televisions are unaffected by the new tax because they are already subject to provincial sales tax. However, if any of those items break down and need repair, you’ll be paying HST on the whole repair, including labour. Before the HST, you would have paid provincial sales tax and GST on only the parts.
“The big thing that will affect most people is energy,” says Mr. Schlesinger, adding most people don’t consume services on a daily basis so it doesn’t seriously affect them.
British Columbia residents will get a break there because the province will provide a credit for energy –electricity, natural gas, heating fuel, heat, steam, propane, kerosene, firewood and pellets — purchased for residential use.
One break B.C. residents will not get is on entertainment services, which do not face provincial tax. “This was not on anybody’s radar screen and suddenly it was announced,” says Ian Tostenson, chief executive of British Columbia Restaurant and Food Service Association.
“We are now going to pay 7% more for that meal, 7% more for that movie, 7% more for that ski ticket, 7% more for golf. There were a lot of exemptions under the provincial sales tax,” Mr. Tostenson says.
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