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Protesters on the front lawn of the B.C. legislature before the Throne Speech in Victoria August 25, 2009 protesting the HST. John Lehmann/Globe and Mail NO HST (John Lehmann/The Globe and Mail/John Lehmann/The Globe and Mail)
Protesters on the front lawn of the B.C. legislature before the Throne Speech in Victoria August 25, 2009 protesting the HST. John Lehmann/Globe and Mail NO HST (John Lehmann/The Globe and Mail/John Lehmann/The Globe and Mail)

Fund watch

Two firms take HST hit for fund investors Add to ...

Two small mutual fund players are giving consumers a break on the new harmonized sales tax (HST).

Brandes Investment Partners & Co. has launched a new series for four large funds that is targeting investors residing in provinces like Alberta, which still only charge the 5 per cent federal GST. The HST, which combines the provincial and federal tax as of July 1, ranges from 12 per cent in British Columbia and 13 per cent in Ontario to as high as 15 per cent in Nova Scotia.

The four Brandes funds are Brandes Global Equity, Brandes International, Brandes Sionna Canadian Equity and Brandes Sionna Canadian Balanced.

Brandes, which has $3.2-billion in assets and is a unit of U.S.-based Brandes Investment Partners L.P., plans to absorb the higher costs from the HST in its remaining funds until at least the end of this year.

"We are trying to be as fair as we can without, obviously, killing ourselves financially," Leah Brock, senior vice-president of marketing at Brandes, said Friday. "If people are paying the tax, they should be paying for the province that they live in."

Most firms have opted for a federally-approved blended rate, which requires the new HST rate charged per fund to be based on where investors live and the market value of their assets. See Globe story.

"We think it is just unfair for clients in the provinces that don't have the HST to pay that high tax rate," said Ms. Brock. "The blended rate [for Brandes]is going to be so close to the actual 13-per-cent HST in the smaller funds. We just don't have the big numbers of people from Alberta, Quebec, Manitoba and Saskatchewan [which are among the non-HST provinces]in those funds."

Hartford Investments, which has $1.6-billion in assets and is a unit of U.S.-based Hartford Financial Services Group, is absorbing the higher costs from the HST temporarily in its funds. See Morningstar Canada.

"We are doing what we are doing because we are a reasonably small company - as is Hartford," but eating the tax is not feasible for many larger firms, said Ms. Brock. "The government handcuffed us all in what we could do. They didn't give us enough time to figure this out. We have gone from being an industry that has only ever had to worry about a uniform federal tax to being an industry that now has to worry about 12 individual taxes."

 

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