Residents of British Columbia and Ontario can celebrate a new regional distinction on Canada Day - different rules for the new harmonized sales taxes taking effect in both provinces on July 1.
While both are adopting a single HST to replace the dual provincial sales tax (PST) and federal goods and services tax (GST), the new tax systems will result in some significant tax differences between the two jurisdictions.
Ontario residents, for example, will pay a new 13-per-cent tax rate on gasoline, home heating and electricity with the combined HST. They previously paid just 5 per cent GST and no PST.
In B.C., by comparison, the provincial government is "rebating" its portion of the HST on gasoline at the point of sale, which means the sales tax rate will remain 5 per cent. And the province will also provide a rebate for the provincial portion of tax on home electricity and heating costs, so their tax rate will be 5 per cent.
The new HST is being adopted by both provinces in an effort to streamline the tax system and eliminate the hidden taxes embedded in the price of consumer products, with both B.C. and Ontario arguing the end result should ultimately be lower consumer prices. Quebec and three Atlantic provinces have already introduced a harmonized tax.
How will the HST affect you? Do you approve of the new tax?
Ontario's harmonized tax rate will be 13 per cent after combining the 5-per-cent GST with the 8-per- cent PST, while B.C.'s HST rate will be 12 per cent with the 5-per-cent GST and its 7-per-cent PST.
Both provinces have pledged various income tax cuts and rebates to try to ensure the HST does not boost the ultimate tax cost for consumers - indeed, the B.C. government has pledged residents "won't pay one penny more tax" because of the HST.
Critics have complained the tax burden will inevitably rise with a higher tax level now being applied to so many services that previously were exempt from the PST - including home renovations, taxi fares, real estate commissions, funeral services, hair cuts and dry cleaning.
Ontario says it will not raise the tax rate on children's clothes, diapers, newspapers, books, feminine hygiene products and prepared food and beverages under $4 because the provincial portion of the HST on those items will be rebated at the point of sale, keeping the tax rate at 5 per cent for those goods.
B.C. will begin charging the full 12 per cent HST on newspapers and magazines, but the provincial tax will not apply to books, so their tax rate will remain at 5 per cent. The western province also plans to drop the tax rate for disposable diapers from 12 per cent currently to 5 per cent with the HST.
While Ontario will continue to charge no provincial tax on prepared foods under $4 - but will continue to charge the full 13-per-cent HST on restaurant meals over $4 - B.C. will begin charging the full HST on all snack foods and restaurant meals, raising the tax rate to 12 per cent from 5 per cent previously.
Some long-standing tax differences will remain between the two provinces after the HST changeover. B.C. residents will continue to pay no sales tax on auto or home insurance, for example, while Ontario residents will continue to pay 8-per-cent provincial tax on home insurance, but no sales tax on auto insurance.