News and Views

HST For Ontario… It's A Trap!

Posted by on May 12, 2010 | 9 Comments

There should be an image here!My name is Adam, and I live in Northern Ontario, Canada. Last year our provincial government launched a campaign to establish the HST (Harmonized Sales Tax) — this would combine the PST (Provincial Sales Tax) and GST (Goods and Services Tax) that we have right now.

In a vote launched last year, each household was given one ballot. In the paperwork included with the ballot, it was stated that, if HST were to go live, each household would get up to $1000 every year for three consecutive years as tax relief. What a lot of people failed to read was the up to portion.

The HST has passed and will go live as of July 1st, 2010. When this happens, for example, fresh foods previously taxed at 8% will be 13% — as if fruits and vegetables weren’t already expensive enough!

As far as the up to $1000 every three years part of the deal… well, I’ll get $100 in July and then another $100 in September. Apparently, the money you get is based off of your income. According to the government, if you make a lot of money, then you can afford to spend a bit more when shopping.

I decided to go a little deeper and investigate what else this will affect. If you were to sell your house through a realtor, HST will apply to the sale. So let’s say you turn around and sell your house for a low price of $200,000. HST on that house through a realtor will make the final price $226,000. Now, you have two choices here. You can sell the house for $200,000 and take a loss of $26,000 as the realtor will want that much for the HST. Or you can list it as $226,000 and, when it’s sold, have the realtor write up a receipt for $200,000. Here’s the problem: do you know of a bank that will secure a mortgage on a house for more than what the house is worth? I certainly don’t. This will, in turn, make listing houses in realtor markets a very difficult thing to do — because if you sell your house privately, the HST does not apply!

Personally I think they need to do away with PST, GST, and HST… and create what I like to call a consumption tax. Let’s say your gross pay at work is $1000, bi-weekly. Well after the greedy government gets its hands in there with the income taxes and takes a good solid chunk of that, you are left with, let’s say, about $800 to take home. Well with the consumption tax, you’d gross $1000 bi-weekly and take home $1000. You wouldn’t be taxed until you make a purchase with that money. Even if such a tax were in the 15% to 20% range, an individual would be more in control of how much they’d be taxed based on purchases made at their discretion. People who stick to the bare essentials will reasonably retain more of their income than those who like to buy a lot of luxury items.

Just a thought. Let me know what you think.

As mentioned above, my name is Adam, and I live in Northern Ontario. I work for a company called Ontera, where I troubleshoot Internet, phones, and data circuits, and I work on the network abuse team helping to protect our network from viruses and other issues. I also make movies on YouTube, which can be seen here. I like to engineer things to make life easier.

[Photo above by alancleaver_2000 / CC BY-ND 2.0]

  • http://lockergnome.com/bradleybradwell Brad Roberts

    We’re facing that in British Columbia over here. However, it’s sounding like the campaign to axe the HST is going pretty well. The BC Liberal party hasn’t budged though, but they better soon, or else they’re going to be booted out of office pretty quick.

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  • Dave Rivers

    You cannot and should believe everything you read on the internet.

    Fresh fruits and vegetables are non-taxable and will remain that way.

    On houses, the real estate commission will be taxable on resale houses, not the sale price of the house.

    I do not agree with the HST but please get your facts straight before posting.

  • Greg Frederick

    I agree that adding sales tax to home sales, especially only if handled through a realtor, is totally misguided. Consumption taxes, however, are not the answer unless you exempt food, shelter, utilities, etc. so that the consumption tax is only on discretionary spending. The fairest taxation in terms of being an affordable burden is a straight income tax. Anything else puts undue pressure on those with low incomes who are least able to pay.

  • Mark Norsworthy

    Re: HST Comment by Adam from Northern Ontario

    Adam should go back to finish his research before he makes a case based on myths and mistakes. For example, the HST will cause a ripple in the real estate market for several reasons, but will affect a realtors service fee and not the sale price of the real estate; additionally, the GST (5%) is currently applicable to the service fee of a realtor, and after the HST, 13% will apply to the realtor’s service fee. Accordingly, an increase of an additional 8% will occur on the realtors fee. This is not the end of the world. Businesses and government will find the HST a streamlining of the business of taxation; savings to businesses may mean cheaper products or services, and to government, lower taxes.
    We will adapt. If for example, the government finds that taxes are way up with the HST, then we should expect to get tax relief in one form or another. Look at the big picture. Taxes are a reality. If your idea was implemented to eliminate all taxes and use a pure consumption tax only, then everyone would go back to the barter system and anachy would result.
    Mark from Ontario

  • BCampbell

    The HST was actually a good idea in concept: streamline two taxes into one, therefore reducing administrative redundancy. Problem is, this is government, not private industry. The provincial tax employees will walk out of their office on June 30th with fat severance packages, then return on July 2nd to the exact same offices as federal tax employees. Very few, if any, positions will be cut. Score after the 1st period: Government 1, Taxpayers 0.

    The second good concept behind the HST is that it was to be revenue neutral. The premier promised that. As the provincial portion of the tax will now apply to hundreds of items it previously did not, the percentage would be reduced to keep the tax neutral. This of course did not happen. We will simply pay more tax on everything. The premier has admitted, just last week, that this will indeed cost the average family (4) in excess of $800 more in taxes, per year. Score after the 2nd period: Government 2, Taxpayers 0.

    Going into the 3rd period, the premier and his government are feeling pretty good about their game. They appear to be heading for a shut-out and they feel like showboating. Guess what? The taxpayer has to pay HST on all goods purchased that will be used after July 1st, even if they are bought and paid for before that date. All new housing purchases had the HST added as of June 2009 with the projection that they wouldn’t be completed until after the tax goes into effect. Good job Mr. Premier, already collecting a tax that is not yet law. Looks like the outcome of the game was determined before it even started. Score after the third period: Government 3, Taxpayer 0. A shut-out. Any surprise?

    Why the Ontario taxpayer is so complacent is beyond me….maybe most of them just do have too much money…

  • Jonathan Rose

    I just wanted to point out that the groceries have no tax on them now and wont have any after July 1st. The same goes for new homes under $400,000 as well as resale homes. That covers 93% of all homes in Ontario.
    A handy resource that explains what is and isn’t affected is on the government’s website. Check it out
    http://www.rev.gov.on.ca/en/taxchange/pdf/taxable.pdf

  • Toast

    @BCampbell: accounting law dictates that nothing is “earned” by an entity until the transaction is carried out in full, ie. if you buy a plane ticket now for a flight in December, you do need to pay HST, but the airline doesn’t record it as a sale until December, not right away, as you might think, meaning taxes aren’t recorded until such time as well. Same with the government: they only collect PST on the portion of sales between two dates, meaning if the airline has to pay the PST between now and November, your December flight’s HST isn’t included. But I digress.

  • Rich

    I’m a Reseller (computer shop).
    You think it’s only going to cost you an extra $800/Yr ?
    Think again.
    My Supplier will get charged the 13%, I will pay the 13% and the customer will get charged the 13% – so just with the HST alone in a supply chain the end customer will pay 39% tax – an extra 24% (Going to the good Ole’ government) This does not include reasonable profit markups for each entity in the chain. If you figure only 15% markup for each, the end result is that a product worth $100 US will cost a consumer $190! If the markup is more than 15% – You can expect to pay DOUBLE what you’d pay in the US. Who does this benefit? – large companies that can afford to have relationships directly with the product manufacturer and get it in the country in one shot – thus avoiding the supply chain markups and HST (only Once) – So long to the small business guy!