The PST, GST, HST Dilemma

I have been meaning to have a few things to say about the move to bring in HST in Ontario for a while now but have been trying to find out EXACTY what will and what not be affected by this proposed change. If you too are confused by this whole thing then welcome to the club. There seems to be no documents listing what items will be taxed at the new rate of 13% and what items or services will be exempt, its hard enough to decide what is currently taxed with either PST and / or GST!
Please excuse the long post it simply cannot be fully examined in less space.

I will give a couple of examples of where my confusion comes from. Recently our MPP here in Grey Bruce, Bill Murdoch, has been vocal in his condemnation of this move (a position with which I fully agree) and in a letter to the editor of our local newspaper said:-
“The HST is bad news for the average Ontarian. Many PST exempt items are now going to be taxed and as more people learn about what is going to increase in price by 8 percent, the more emails and calls my office will receive from irate constituents. Lately, my office has been receiving calls concerning the fact the HST is going to be charged on rent. That means rent is going up by 8%, even with rent control. If you are paying $600 a month for an apartment, as of July 1, 2010 you are going to see your rent jump by $48 a month due to the HST. “

Upon checking the Canada Revenue Agency web site on GST / HST however I found this:-
1. A rental of a residential complex or a residential unit in a residential complex is exempt if the complex or unit is to be used by an individual as a place of residence or lodging and if the rental period is a period of continuous occupancy or right of occupancy of one month or more to the same individual.

That would SEEM to indicate that rent is exempt from GST, but then who realy knows, is Bill right or is it all “to be decided”?

He goes on to say “The problem with harmonization is simple, the PST exemptions are gone on almost every item it was previously on, essential items we use daily. Now your rent, your gas, your haircut and even your Tim Horton's coffee are going to increase by 8%.”

That would seem to be accurate, certainly our Phone and Hydro bills are currently only taxed by GST and so presumably would see an increase in tax burden and we must assume that most items that are now subject to GST will not be exempt from the HST. But what of items and services currently GST exempt (or “0% rated) that PST is charged upon? One such item is your house and car insurance, my bills show a charge for PST but not for GST, it would seem at first glance that we may just gain on that one. Which way will these items go, no one knows for sure it would seem, apparently even the proposed legislation is unclear on many of the details. Another such item is the little known exemption for self employed people who gross less than $30,000 a year who do not have to collect GST, will the miniscule advantage these folks, who can ill afford any reduction in income, have this slight break removed. Who knows!

In an effort to find out some of the answers I searched the internet for information, whilst I found no lists regarding the changes to Ontario tax, I did find this on the recent changes to BC tax which may (or may not) have some bearing upon the changes proposed here.

GOODS subject to BC Harmonized Sales Tax - Energy conservation equipment, smoke detectors and fire extinguishers, work related safety equipment basic cable TV and residential phones, non-prescription medication, vitamins and dietary supplements, residential fules (electricity, natural gas) and heating, all food products (only basic grociers will remain exempt from BC HST), safety helmets, life jackets, first aid kits, magazines and newspapers.

SERVICES subject to the new B.C. HST - Airline fares within Canada, Funeral services, Real estate fees, Membership fees for health clubs, dry cleaning, personal services such as hair care, Movie and theatre tickets, Professional services such as accounting and home care, Repair services for household appliances, and Household maintenance such as renovations and painting.

GOODS and SERVICES that are exempt from the B.C. Harmonized Sales Tax of 12% - These include fuel including gas, diesel. Also, children’s items including books, clothing, footwear, car seats, booster seats, diapers and feminine hygiene products are exempt from the 12% BC HST tax.

The CRA has a list generalities regarding GST / HST but one must view numerous pages to see the details. For more detail on what is and is not GST taxable see the CRA web site, it is unclear whether the proposed ONTARIO HST will have additional exemptions or inclusions. However here is a list of most of the exempt items currently listed, it must be presumed that most everything else is taxed!!

Goods and services taxable at 0% include:
· basic groceries such as milk, bread, and vegetables.;
· agricultural products such as grain, raw wool, and dried tobacco leaves. (??)
· most farm livestock.
· most fishery products such as fish for human consumption.
· prescription drugs and drug-dispensing fees.
· medical devices such as hearing aids and artificial teeth.

Exempt goods and services include:
· used residential housing.
· long-term residential accommodation (of one month or more), and residential condominium fees.
· some sales of vacant land or farmland..
· most health, medical, and dental services performed by licensed physicians or dentists for medical reasons.
· child-care services (day-care services for less than 24 hours a day) for children 14 years old and younger.
· bridge, road, and ferry tolls legal aid services.
· many educational services such as: courses from a vocational school that lead to a certificate or a diploma to practise a trade or a vocation; or tutoring services for an individual who takes a course approved for credit by a school authority
· music lessons.
· most services provided by financial institutions such as arrangements for a loan or mortgage
· arranging for and issuing insurance policies by insurance companies, agents, and brokers.
· most goods and services provided by charities.
· certain goods and services provided by non-profit organizations, governments, and other public service bodies, such as municipal transit services and standard residential services such as water distribution.

If we then look at what is now PST exempt we MAY get an idea of how much of a tax grab this actualy is (or will be). If you can figure it all out please let me know, it seems to me that we are screwed not matter what!!

For Retail Sales Tax (RST) purposes, all goods are taxable unless the purchaser is entitled to an exemption, and all services are non-taxable unless specifically taxed under the Retail Sales Tax Act. The lists below provide some examples of taxable and non-taxable goods and services in Ontario.

Common goods that are not taxable:-
basic groceries, food products (except for candies, confections, snack foods and soft drinks)
prepared foods sold by an eating establishment for $4 or less
children's clothing (including diapers) , footwear costing $30 or less
feminine hygiene products , newspapers
drugs and medicine sold under a doctor's prescription
goods designed solely for people with physical disabilities
vitamins and minerals.

Taxable services:-
telecommunication services (telephone, cable, pay television)
accommodation for less than one month (hotels, motels, bed and breakfasts)
labour provided to install, repair or maintain tangible personal property
labour provided to install, configure, modify or upgrade a computer program
contracts for the service, maintenance or warranty of goods, including computer programs

Non-taxable services (examples):-
dry cleaning ,carpet and upholstery cleaning
personal services, such as hair styling, barbering, and beauty treatments
medical and health services ,veterinary care
car washing and engine shampooing
labour to install or repair real property or fixtures.

The Canadian Taxpayers federation has this to say:-
“The economy is still struggling; people are worried about their jobs and are spending less. Now is the wrong time to add 8% to the costs of gasoline; diesel; propane; home heating fuel; home electricity; natural gas; home TV service; home internet service; home phone service; cell phone charges; hair cuts; lawyers’ fees; accountants fees’; mechanics’ fees; ballet lessons; rink rental fees; tailoring; magazine subscriptions; mutual fund fees; massage; chiropractic; audiology; train fares; plane fares; taxi fares; bus fares; vitamins; dry-cleaning; grass cutting; snow removal; camping fees; firewood; meals under $4; new homes over $500,000; gym fees; home renovation labour; and real Christmas trees.”


One final note here, our federal government is trying to spin this as an entirely Provincial initiative however if that were so why would the Federal government promise $4.3-billion to help Ontario adjust to the tax change, and give British Columbia $1.6-billion to “assist” with their change. They have also offered to cut the remaining holdout provinces a cheque to ease the transition if they agreed to harmonize the taxes. The question has to be asked “what’s in it for them”, I find it hard to believe its simply just to make them look good as that FEDERAL HST rebate / bribe cheque arrives on your doorstep.

With so many folk out of work and many of them unlikely to find work any time in the foreseeable future and with so many families already struggling to pay for the necessities, it hardly seems like a good move either politically or economically to do this. But then who am I to judge, I’m just one of those on the shitty end of the stick!