Happy Canada Day! HST to hit B.C. and Ontario
If you live in Ontario or British Columbia, a slew of services are about to get more expensive on Canada Day, leaving many consumers a little dazed and confused about what is actually changing.
However, one thing is certain — if you need to top up your gas tank for a holiday roadtrip in Ontario, waiting until Thursday morning is not your best option, since it's going to cost more when the new Harmonized Sales Tax comes into effect.
On July 1, Ontario and B.C. will both replace the GST and provincial sales tax with the HST on services including haircuts, Internet service, cemetery plots and in Ontario, gasoline. But, some prices go up and others go down, and it depends on which province you live in.
"I think there's a lot of confusion," said Herbert Schuetze, an economics professor at the University of Victoria. "It's not surprising, because it's fairly multi-faceted. There are a lot of impacts, with a lot of variables."
In Ontario, the tax on gasoline will jump from five per cent to 13 per cent. The same is true for home heating costs in Ontario, where the cost of natural gas and oil is now subject to the HST.
But in B.C., consumers will be shielded from the higher energy costs that Ontario faces, and it's in the service industry where the public will feel the hit in the pocketbook.
Movie tickets in that province are jumping from five to 12 per cent, a potential worry for theatre owners. But in Ontario, viewers can catch the next showing of Toy Story 3 for a little less after Canada Day, because the HST actually drops the tax on a ticket from 15 per cent to 13 per cent.
"The truth is, most people don't know exactly what is subject to the new tax and what isn't," said David Schlesinger, head of indirect tax at KPMG. "But it's the items that people spend on regularly where they're really going to see the difference."
Both governments have tried to soften the initial blow of the new tax by handing out cash rebates to consumers, but that is only temporary, said Schlesinger.
He said theory suggests the cost of services will eventually fall as business costs are reduced, and the savings are passed on to consumers, but that doesn't necessarily ease people's minds.
In Ontario, single people making less than $80,000 will receive three $100 rebate cheques, while single parents and couples with less than $160,000 in net income collect $1,000 over three payments by 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.
While most items, like kids clothes, electronics and cars are unaffected by the new tax, labour costs are where people will get to see their pennies pinched. After July 1, HST will be charged on labour for things such as repairs, as opposed to now where provincial sales tax and GST are charged only on parts.
A new tax is never popular with the public, but people won't really think about it after a while as they adjust to the higher prices, said Schuetze.
"There is a checkerboard of winners and losers," he said. "In the long run, it might be better for a lot of businesses, but it's not going to benefit everybody equally."
The real cost in B.C. might be the political fallout from the fight over the HST, said Schuetze.
While Ontario Premier Dalton McGuinty has managed to avoid a precipitous plunge in his poll numbers despite the unpopular tax — three-quarters of people surveyed in Ontario oppose the HST — his counterpart in B.C. has not been so lucky.
B.C. Premier Gordon Campbell has seen his popularity fall to a level that may spell doom for his Liberal government in the next election. And on Wednesday, a petition signed by 700,000 British Columbians will be delivered to the government by former premier Bill Vander Zalm protesting the HST.
"At the end of the day, we will feel it," said Schuetze. "We just don't know for how long."
