Recently Ontario Premier Dalton McGuinty was musing about the possibility of introducing the so-called Harmonized Sales Tax (HST), which some provinces have adopted under the guise of simplifying and harmonizing the complex federal and provincial tax regimes. His reasons for taking “a good look” at Ontario adopting the HST ostensibly was to “simplify” the remittance process and to “save businesses money”.
But to me, it seems much more likely that the real reason behind this “good look” is that provincial coffers would nab a huge windfall in additional taxes as many of the goods and services sold in Ontario today are taxed under the GST and not the current provincial sales tax.
For instance, if you purchase a new home that home ‘s purchase price is subject to the 5% GST. So if you buy a new home for, say $400,000, the builder is obligated to tack on an additional 5%, or $20,000 in GST. Under the HST the government of Ontario would be able to tack on its own 8% tax raising the cost of that home by another $32,000.
But it isn’t just homes that would fall victim to this new tax, it is a wide range of other services that are currently only subject to the GST. Paying legal fees to a lawyer? The lawyer must charge 5% GST. With the HST, the lawyer will then be obligated to charge 13% in HST. Same with accountants, psychologists, architects, engineers, and a whole slew of other professionals that currently only charge the GST.
If you happen to be suffering from depression and seek counseling form a psychologist, the usual fee is $125.00 plus GST, which works out to about $132,00. McGuinty’s HST will depress you even more, as the cost of treatment would now increase by an additional 8%, as Dalton would want his cut. Seeking help from a psychiatrist is out of the question, as most psychiatrists, who are medical doctors and are covered under the province’s health plan, no longer counsel patients, but assess and refer them to psychologists, which is much more lucrative.
Newspapers, magazines, radio and television stations would increase the cost of their products and services by an additional 8%, as Dalton would want to claim his own piece of the pie under the new GST. A full Page ad in The Globe and Mail, which under some circumstances can cost in excess of $50,000 is subject to $2,500 in GST today. Under McGuinty’s scheme that same ad would have an additional $6,500 tacked on in HST.
In his musings about this new HST, McGuinty claims it will save businesses somewhere on the order of $100 million per year, as they will no longer have to file duplicate returns. What McGuinty hasn’t talked about and one wonders why the so-called mainstream media hasn’t picked up on this either is how much it will cost the taxpayers of Ontario.
The Greater Toronto Homebuilders’ Association has estimated that a new HST regime would increase the average price of a new home in the GTA by about $46,000! That’s a huge windfall for Dalton and the boys to buy more votes with, when you think that during a good year Toronto homebuilders pump out somewhere in the neighbourhood of 3,000 new homes. The GTA’s new home market alone would increase the province’s revenues by close to $140 million. When you extrapolate these added costs across the entire provincial economy, the additional revenue will be many billions of dollars.
What do you suppose happens when you take this much cash out of an economy in the form of additional taxes? The end result will make the current recession look like economic boom times, as the burden of these new taxes would crush any hope for a recovery any time soon. It would further depress the new home market, as well commercial leasing and other businesses.
Musings such as these demonstrate the degree to which the premier of Ontario is out of touch with the realities facing the citizens of the province. Using the specious rationale that the HST would save business $100 million in accounting costs is an act of kindness Ontarians really don’t need. It’s likely to totally screw the economy.
Klaus Rohrich is senior columnist for Canada Free Press. Klaus also writes topical articles for numerous magazines. He has a regular column on RetirementHomes and is currently working on his first book dealing with the toxicity of liberalism. His work has been featured on the Drudge Report, Rush Limbaugh, Fox News, among others. He lives and works in a small town outside of Toronto.
Klaus can be reached at [email protected]
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