Aren't consumers in B.C. and Ontario going to end up paying higher sales tax on all kinds of goods and services when the two provinces join the harmonized sales tax (HST) program next July?
Yes, the new combined tax will be imposed on a number of items that did not draw provincial taxes in the past, such as dry cleaning, haircuts and gym memberships.
In general, goods and services that were taxed only at the federal level in the past will see the rate jump to 13 per cent from 5 per cent in Ontario, and move to 12 per cent from 5 per cent in B.C.
The two provinces won't be moving in lockstep, however. B.C. has said it will not add the provincial portion of the HST to gasoline and fuel oil, for instance. And the two provinces handle taxes on prepared food differently. As a result Ontario residents will see the higher rate on 19 per cent of their purchases, while B.C. residents will pay more on 21 per cent of their purchases, according to a study by Toronto Dominion Bank.
It is very confusing. What is the bottom line?
TD says that consumers in both provinces will see the effective tax rate on their overall consumption rise by 1.5 percentage points. And this will lead to a permanent 0.4-per-cent boost in Canada's consumer price index, over what it would have been without harmonization. To confuse things further, don't forget that Ontario is cutting its income tax rate and issuing rebate cheques to try to offset the increases. B.C. is boosting income tax credits, repealing some other taxes, and issuing rebates to lower-income earners.