Marna Crape, a server at Osoyoos’s Wildfire Grill, mixes up a drink. The provincial government recently announced it intends to harmonize the Provincial Sales Tax with the federal Goods and Services Tax, resulting in a new tax called the Harmonized Sales Tax (HST). That change will affect some Osoyoos industries including the hospitality and real estate sectors. Photo by Laurena Weninger
OSOYOOS TIMES-August 5, 2009
By Laurena Weninger – Osoyoos Times
If you are paying attention to the news about upcoming tax changes for B.C. residents, you might consider buying a house now, but – if you are a business owner – waiting until next year to buy a car.
The term “HST” is causing some pretty hot debate in B.C. right now.
“It certainly is generating a lot of interest,” said Terry Craig, a certified general accountant from Osoyoos’s Kemp Harvey Kemp Inc.
He said the proposed new tax offers benefits for businesses and drawbacks for consumers.
On July 23, Finance Minister Colin Hansen announced that the provincial government intends to harmonize the Provincial Sales Tax (PST) with the federal Goods and Services Tax (GST) into a new tax, called Harmonized Sales Tax (HST).
Effective July 1, 2010, the tax will combine the five per cent GST with the seven per cent PST.
“The drawbacks are definitely for the consumer,” Craig said. “They have to pay an additional seven per cent tax. Virtually every item they paid GST on before, they now have to pay HST on.”
There will be exceptions – baby car seats, and children’s clothing, for starters.
The new tax won’t apply to gasoline, books or feminine hygiene products.
But other things currently not taxed eventually will be – including school supplies, magazines and newspapers and the food served in restaurants.
“I don’t like it,” said Patrick Hugh, owner of Osoyoos’s Wildfire Grill, adding he doesn’t really know enough about the new tax to comment further than that. “It’s going to affect the hospitality industry.”
But Craig said that like any price increase, it will likely affect things for a short while, but then be taken in stride.
“At the end of the day, I don’t know if it’s going to keep people away from going out to dinner.”
The tax is also going to affect the real estate industry.
The entire 12 per cent tax will apply to new homes – save for a rebate system for homes under $400,000.
“You can get back up to $20,000,” Craig explained. “But if you are buying an $800,000 house you’re still going to be paying $36,000 tax that wasn’t there before.”
Pre-owned houses won’t be subject to the tax, but some of the costs involved in purchasing will be, said Damian Stathonikos, director of communication from the B.C. Real Estate Association (BCREA).
He said appraisals, home inspections and real estate fees are all going to be affected.
“These things will all cost seven per cent more,” he said, adding that buyers already have to deal with property transfer tax.
HST will mean paying more.
“This isn’t a fair tax because real estate customers are going to shoulder an unfair burden here.”
Mary Ihme of Re/Max Osoyoos Realty Solutions agrees.
“I believe this will hurt the housing industry and make properties unaffordable,” she said. “It was understood when the Liberals were brought into power they would not bring a Harmonized Sales Tax into British Columbia, so this news is very disappointing.”
But Craig said there are some things about the new tax that will be a benefit.
“For businesses it will be advantageous,” he said.
Right now, when a business owner buys something, he or she pays PST and won’t get it back.
When the HST comes into effect, businesses will get back their GST (as they do now) plus that additional seven per cent.
“That’s where they get their savings,” Craig said. “Now they get their money back.”
In some industries – such as construction, where companies have to purchase many items – that will be a big payoff.
Those savings could be passed on to the consumer, meaning savings all around.
Craig said another example is when a business purchases a vehicle.
“Why would you buy a car now, if you can get that seven per cent back, next July, if you are a business? Wait till next July, save yourself a couple of thousand dollars.”
The remittance of the new tax could be easier.
The federal government will collect both taxes, possibly streamlining the process.
Ultimately, the kinks haven’t yet been worked out.
Over the next year, things are likely to be fine tuned by the government.
“There’s going to be so many changes by the time we get to next July,” Craig said.
The BCREA hopes to be part of those changes, Stathonikos said.
It is waiting for a meeting with the B.C. minister of finance, hopefully next month.
The association plans to lobby the government to take steps to mitigate the possible negative impact on real estate from the tax and continue some exemptions in that industry.
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