Harmonized sales tax to take effect July 1, 2010

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Ontario residents and businesses will begin paying a harmonized sales tax, which blends the current eight-per-cent PST with the five-per-cent federal GST, next summer, the provincial government announced in its budget Thursday.

Along with saving businesses taxes on supplies and equipment, which are currently subject to Ontario's PST, advocates for a harmonized sales tax argue the move will reduce the administrative burden on businesses completing tax forms.

Ottawa's homebuilding industry had previously come out against tax harmonization, arguing the move would add $17,000 in taxes to the cost of a new home because new housing is not directly subject to the PST.

However, to soften the blow, new homes costing less than $400,000 will continue to be subject only to the five per cent federal GST, while purchasers of homes costing between $400,000 and $500,000 will receive a partial tax credit.

Similarly, a slew of consumer items, including children's clothing, diapers, feminine hygiene products, books, child car seats and boosters, will continue to only be subject to the five-per-cent GST.

Quebec, Nova Scotia, New Brunswick and Newfoundland harmonized their provincial sales tax with the GST in 1997. In the Atlantic provinces, annual spending on machinery and equipment investments rose 12.2 per cent, according to a 2007 report by the C.D. Howe Institute. -- By Peter Kovessy

Organizations: C.D. Howe Institute

Geographic location: Ontario, Ottawa, Quebec Nova Scotia New Brunswick Newfoundland

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