Harmonized sales tax

Last updated

The harmonized sales tax (HST) is a consumption tax in Canada. It is used in provinces where both the federal goods and services tax (GST) and the regional provincial sales tax (PST) have been combined into a single value-added tax. [1]

Contents

Jurisdiction

The HST is in effect in five of the ten Canadian provinces: New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario and Prince Edward Island. The HST is collected by the Canada Revenue Agency (CRA), which remits the appropriate amounts to the participating provinces. The HST may differ across these five provinces, as each province will set its own PST rates within the HST. In provinces and territories which have not enacted the HST, the CRA collects only the 5% goods and services tax. The current rates are as follows:

ProvinceHST Rate (%)
New Brunswick 15
Newfoundland and Labrador 15
Nova Scotia 15
Ontario 13
Prince Edward Island 15

The introduction of the HST changed the PST for these provinces from a cascading tax system, which has been abandoned by most economies throughout the world, [2] [3] to a value-added tax like the GST.

Individual HST credit

To help maintain revenue neutrality of total taxes on individuals, the Canadian government (for the GST) and the participating provincial governments have accompanied the change from a cascading tax to a value-add tax with a reduction in income taxes, and instituted direct transfer payments (refundable tax credits) to lower-income groups. [4] [5] The federal government provides a refundable "GST Credit" of up to $248 per adult and $130 per child to low income people for 2009-10. [6] Provinces offer similar adjustments, such as Newfoundland and Labrador providing a refundable tax credit of up to $40 per adult and $60 for each child.

1997 implementation

In 1996, three of the four Atlantic provinces—New Brunswick, Newfoundland and Labrador, and Nova Scotia—entered into an agreement with the Government of Canada to implement what was initially termed the "blended sales tax" (renamed to "harmonized sales tax") which would combine the 7% federal GST with the provincial sales taxes of those provinces; as part of this project, the PST portion of the new HST in these provinces dropped from 10% to 8%. The result was a 15% combined tax when the federal GST was added. The new tax for these provinces went into effect on April 1, 1997.

The HST is collected by the Canada Revenue Agency, which then remits the appropriate amounts to the participating provinces. Subsequent studies have been equivocal as to the success of this implementation for these provinces' economies and their consumers. [7]

2006 and 2008 GST reductions

On July 1, 2006, the Government of Canada reduced the GST nationwide to 6%, [8] resulting in a combined HST for Nova Scotia, New Brunswick and Newfoundland and Labrador of 14%. The GST was again lowered nationwide on January 1, 2008 to its current rate of 5%, [9] resulting in a combined HST in Nova Scotia, New Brunswick and Newfoundland and Labrador of 13%.

Later HST increase in Nova Scotia, New Brunswick, and Newfoundland

On April 6, 2010, the Government of Nova Scotia raised the provincial portion of the HST to 10%, restoring the overall rate in that province to 15% effective July 1, 2010 as part of deficit fighting measures. [10] On April 2, 2012 the premier indicated that the provincial government was planning to decrease the HST back to 13% by 2015 [11] but this has since been canceled by a new government. [12] New Brunswick and Newfoundland raised their HST back to 15% in 2016. [13]

2010 implementation

The Government of Canada's 2008 federal budget called sales tax harmonization "the single most important step provinces with retail sales taxes could take to improve the competitiveness of Canadian businesses" and federal finance officials began to pressure/entice non-HST provinces to abandon their PST systems. [14]

Consequently, in 2008 and 2009, the provinces of Ontario and British Columbia entered into negotiations with the Government of Canada for adopting the HST.

On March 26, 2009, in its annual budget, the province of Ontario announced its intention to merge the PST and GST to take effect on July 1, 2010. [15]

On July 1, 2010 the HST was implemented in the provinces of Ontario and British Columbia, despite public opinion polls showing that 82% of British Columbians and 74% of Ontarians opposed it [16] before it was implemented. The implementation of HST in British Columbia and Ontario replaced the separate GST and PST charged on goods and services in those provinces. [3] [17] Evidence from numerous studies demonstrated that tax harmonization raises business investment and that PST-type taxes slowed provincial economic growth. [2] British Columbia combined the 5% GST with a 7% PST and implemented the HST at a rate of 12% and committed to lowering the HST by two further points, to 10%, by 2014. [18] Ontario's HST rate is 13%, similar to New Brunswick and Newfoundland and Labrador.

Ontario committed to provide a refundable tax credit of up to $260 per adult or child in 2010–11 to low income people, [19] and British Columbia committed to provide a refundable tax credit of up to $230 per adult or child in 2010–11. [20] Federal and provincial tax credits are paid quarterly through the year. British Columbia also provided a one-time transition payment of $175 to low and modest income seniors as well as $175 for each child under 18 to every family with children. [20] British Columbia’s low income credit was mailed out to 1.1 million British Columbians every three months and amounted to up to $230 annually per individual.

On May 4, 2011, an independent panel commissioned by the British Columbia government released a report on the impact of the HST in that province. The report concluded that "Unless you are among the 15 per cent of families with an income under $10,000 a year, you're paying more sales tax under the HST than you would under the PST/GST: On average about $350 per family." [21] The report also predicted that by 2020, the HST is anticipated to result in a BC economy that will "be $2.5 billion larger than it would be under the PST. That's about $480 per person or $830 per family." [21] British Columbia residents voted in a referendum in August 2011 to repeal the HST, resulting in the province reverting to the former PST/GST model, with rates of 7% and 5% respectively, on April 1, 2013.

Reception in British Columbia and Ontario

A study, conducted by the CD Howe Institute before announcements to exempt low value purchases, found B.C. and Ontario's HST likely revenue neutral. [2] A separate report from the Roger Martin task force on the economy found the HST would lower taxes overall as "increased revenue from the harmonized sales tax is matched by reductions in corporate and personal taxes and by tax credits. The effect is revenue loss." The Globe and Mail reporting on the study found that the "Ontario government will actually lose revenue." [22] In a report by researcher David Murrell for the Canadian Centre for Policy Studies, the net impact of the tax was expected to be "modestly progressive" for the poorest households to upper-middle-income families while increasing taxes by $320 in British Columbia and $290 in Ontario. [23] [24]

In November 2009, an Ipsos Reid poll found that the vast majority of British Columbians (82%) and Ontarians (74%) opposed their provincial governments' plans to harmonize the sales tax. [16] Only 39% of the public believed the HST would be beneficial for businesses whereas the Task Force on Competitiveness, Productivity and Economic Progress concluded that a harmonized sales tax would reduce administrative costs for small businesses and lead to reduction in taxes, as they would recover sales taxes they would have paid on goods and services they purchased. [25] Additionally, only 10% of the public agreed that the move would create more jobs. A study by Jack Mintz of the University of Calgary School of Public Policy suggested the HST and a drop in the corporate tax rate would have created almost 600,000 new jobs over ten years. [26]

Rejection in British Columbia

The introduction of HST in British Columbia was extremely unpopular, due to its perception as a "tax hike" and the fact that Premier Gordon Campbell had denied any plans to implement the HST before the 2009 election, only to introduce it anyway shortly after winning a majority government.[ citation needed ]

Former British Columbia Premier Bill Vander Zalm launched a petition against the HST in response to the public outrage. On August 11, 2010, Elections BC informed him [27] that the campaign had succeeded in collecting the signatures of more than 10% of registered voters in each of the province's 85 ridings by July 5, 2010. [28] The success of the petition could require the provincial government to hold a referendum on the tax. Elections BC was expected to make a formal announcement but they declined to do so and chose not to move forward in the process until the courts decided on a case, brought by local business groups, challenging the petition. [27] On Monday, July 5, 2010, Bill Vander Zalm, Chis Delaney and Bill Tieleman announced that they had launched their own lawsuit, a constitutional challenge against the HST because it was never passed into law by the British Columbia's provincial legislature. [29] On August 20, 2010, Chief Justice Robert J. Bauman ruled a petition opposing British Columbia's controversial harmonized sales tax was valid. This decision sent the issue back to the provincial legislature. Bauman said Elections BC was correct when it approved the petition on August 11. [30]

The approval of the petition to recall the HST in British Columbia paved the way for a referendum that allowed British Columbians to decide the fate of the tax system. Elections BC conducted the referendum via mail-in ballot, allowing registered voters to send in their decision in regards to the HST. The 2011 British Columbia sales tax referendum was conducted throughout June and July 2011. In an attempt to appease public anger, the government pledged the referendum would be binding and that they would abide by the will of the people. The Question on the ballot was: "Are you in favour of extinguishing the HST (Harmonized Sales Tax) and reinstating the PST (Provincial Sales Tax) in conjunction with the GST (Goods and Services Tax)? Yes or No" [31]

In November 2010, Gordon Campbell resigned as Premier, noting that his own unpopularity had effectively stopped the government from moving forward with its agenda and made real discussion about the HST impossible. [32] He was replaced by Christy Clark.

The ruling BC Liberals had campaigned in favour of the HST since its introduction the previous year, noting it would be too costly to return to the original GST/PST system; they pointed to the money they would have to pay back to Ottawa, the lost tax revenue, and the amount it would cost taxpayers to have to switch back and forth between tax systems. In April 2011, British Columbia Premier Christy Clark announced a province-wide engagement initiative to listen to British Columbians' suggestions to "fix" the HST. [33]

Faced with plummeting support and the ongoing anger against the HST, in May 2011 Minister of Finance Kevin Falcon announced that if British Columbians vote to keep the HST the rate will drop by 1% on July 1, 2012 and another point in 2014. This will bring the overall rate to 10%. The provincial government also committed to mailing onetime transition payments of $175 per child to families with children and $175 for low and middle income seniors. [18] A month later, the federal government passed legislation to "formalize and give legal force to the reductions in the rate of the provincial component of the HST in British Columbia". [34]

On August 26, 2011, the results of the referendum were revealed by Elections BC, with 55% of 1.6 million voters in favour of abolishing the HST. Retaining the HST was most popular in affluent and highly educated ridings and those with a significant proportion of family businesses. The BC Liberals revealed a plan to reinstate the GST/PST system within 18 months, with a target date of March 31, 2013. [35] As a direct result, British Columbia will have to pay back $1.6 billion to the federal government in order to opt out of the HST program. [36]

On April 1, 2013, British Columbia abandoned the HST and reverted to the GST/PST system. [37]

2013 implementation

In the provincial budget released April 18, 2012, the Government of Prince Edward Island announced plans to introduce a 14% HST to be implemented on April 1, 2013. This would reduce Prince Edward Island's provincial sales tax component from 10% to 9%. The Government of Prince Edward Island was unique amongst Canadian provinces in that it "taxed the GST". Since the implementation of the federal GST in 1990, PEI's 10% PST has been charged on the subtotal of goods which included the federal GST; PST was not charged on services. This resulted in a combined tax of 17.7% for goods purchased before the 7% GST was reduced to 6% and then 5% in 2006 and 2008 respectively. As of 2012, consumers in PEI paid a combined 15.5% tax rate (5% GST and 10% PST applied to the subtotal). The provincial government committed to exempting some items while critics noted that electricity would see an increase from 5% GST to 14% HST; prior to the HST, electricity was not taxed by the PST.

The HST was introduced to Prince Edward Island on April 1, 2013 which dropped the tax on goods to 14% from 15.5% and raised the tax on services from 5% (GST) to 14%. [38]

Affected items

Exemptions

See also

Related Research Articles

<span class="mw-page-title-main">Gordon Campbell (Canadian politician)</span> Premier of British Columbia from 2001 to 2011

Gordon Muir Campbell, is a retired Canadian diplomat and politician who was the 35th mayor of Vancouver from 1986 to 1993 and the 34th premier of British Columbia from 2001 to 2011.

William Nicholas Vander Zalm is a Dutch-born Canadian businessman and politician. He served as the 28th premier of British Columbia from 1986 to 1991.

<span class="mw-page-title-main">Sales tax</span> Tax paid to a governing body for the sales of certain goods and services

A sales tax is a tax paid to a governing body for the sales of certain goods and services. Usually laws allow the seller to collect funds for the tax from the consumer at the point of purchase.

The goods and services tax is a value added tax introduced in Canada on January 1, 1991, by the government of Prime Minister Brian Mulroney. The GST, which is administered by Canada Revenue Agency (CRA), replaced a previous hidden 13.5% manufacturers' sales tax (MST).

In Canada, there are two types of sales taxes levied. These are :

Equalization payments are cash payments made in some federal systems of government from the federal government to subnational governments with the objective of offsetting differences in available revenue or in the cost of providing services. Many federations use fiscal equalisation to reduce the inequalities in the fiscal capacities of sub-national governments arising from the differences in their geography, demography, natural endowments and economies. The level of equalisation sought can vary, however.

The Canada Revenue Agency is the revenue service of the Canadian federal government, and most provincial and territorial governments. The CRA collects taxes, administers tax law and policy, and delivers benefit programs and tax credits. Legislation administered by the CRA includes the Income Tax Act, parts of the Excise Tax Act, and parts of laws relating to the Canada Pension Plan, employment insurance (EI), tariffs and duties. The agency also oversees the registration of charities in Canada, and enforces much of the country's tax laws.

In Canada, taxation is a prerogative shared between the federal government and the various provincial and territorial legislatures.

An ad valorem tax is a tax whose amount is based on the value of a transaction or of a property. It is typically imposed at the time of a transaction, as in the case of a sales tax or value-added tax (VAT). An ad valorem tax may also be imposed annually, as in the case of a real or personal property tax, or in connection with another significant event. In some countries, a stamp duty is imposed as an ad valorem tax.

Income taxes in Canada constitute the majority of the annual revenues of the Government of Canada, and of the governments of the Provinces of Canada. In the fiscal year ending March 31, 2018, the federal government collected just over three times more revenue from personal income taxes than it did from corporate income taxes.

<span class="mw-page-title-main">1998 Nova Scotia general election</span> Legislative Assembly election

The 1998 Nova Scotia general election was held on March 24, 1998 to elect members of the 57th House of Assembly of the Province of Nova Scotia, Canada. The Liberal party and the New Democratic Party tied in the seat count, with 19 each, while the Progressive Conservatives won 14 seats. The Liberals went on to form a minority government with the support of the Progressive Conservatives.

In Canada, motor vehicles are primarily powered by gasoline or diesel fuel. Other energy sources include ethanol, biodiesel, propane, compressed natural gas (CNG), electric batteries charged from an external source, and hydrogen. Canada, like most countries, has excise taxes and other taxes on gasoline, diesel, and other liquid and gas motor fuels, and also taxes electricity at various administrative levels. Most provinces and territories in Canada also have taxes on these motor fuels, and some metropolitan areas such as Montreal, Greater Vancouver, and Victoria impose additional taxes.

<span class="mw-page-title-main">39th Parliament of British Columbia</span>

The 39th Parliament of British Columbia sat from 2009 to 2013, replacing the 38th parliament and being succeeded by the 40th parliament. It was composed of two elements: the Legislative Assembly of British Columbia, as elected by the general election of May 12, 2009, and The Queen represented by the Lieutenant-Governor. That election resulted in a majority government for the BC Liberal Party led by Gordon Campbell, and a BC New Democratic Party official opposition.

Sales taxes in British Columbia come in the form of the Goods and Services Tax (GST) and Provincial Sales Tax (PST).

Many governments offer a hybrid tax credit or hybrid tax rebate as a financial incentive for consumers to purchase a hybrid vehicle.

<span class="mw-page-title-main">2011 British Columbia sales tax referendum</span>

A referendum on sales tax was held by postal ballot in British Columbia from June 13 to August 5, 2011, though Canada Post workers were locked out until June 27. Voters were asked whether the Harmonized Sales Tax (HST) should be retained or split back to the original Provincial Sales Tax (PST) and Goods & Services Tax (GST). If the majority of voters voted "Yes" to extinguish the HST, 7% PST would be reinstated and the combined tax rate would remain at 12%. If the majority of voters voted "No", the BC government would reduce the HST rate to 11% in 2012 and 10% in 2014.

<span class="mw-page-title-main">Value-added tax</span> Form of consumption tax

A value-added tax (VAT or goods and services tax (GST), general consumption tax (GCT)), is a consumption tax that is levied on the value added at each stage of a product's production and distribution. VAT is similar to, and is often compared with, a sales tax. VAT is an indirect tax because the consumer who ultimately bears the burden of the tax is not the entity that pays it. Specific goods and services are typically exempted in various jurisdictions.

Carbon pricing in Canada is implemented either as a regulatory fee or tax levied on the carbon content of fuels at the Canadian provincial, territorial or federal level. Provinces and territories of Canada are allowed to create their own system of carbon pricing as long as they comply with the minimum requirements set by the federal government; individual provinces and territories thus may have a higher tax than the federally mandated one but not a lower one. Currently, all provinces and territories are subject to a carbon pricing mechanism, either by an in-province program or by one of two federal programs. As of April 2024 the federal minimum tax is set at CA$80 per tonne of CO2 equivalent, set to increase to CA$170 in 2030.

Corporate taxes in Canada are regulated at the federal level by the Canada Revenue Agency (CRA). As of January 1, 2019 the "net tax rate after the general tax reduction" is fifteen per cent. The net tax rate for Canadian-controlled private corporations that claim the small business deduction, is nine per cent.

Sales tax in Alberta consists only of a federal consumption tax, the Goods and Services Tax (GST).

References

  1. ↑ "What is HST?". Canada Revenue Agency. Archived from the original on 2012-02-18. Retrieved 2009-03-26.
  2. 1 2 3 Harmonized tax badly needed and likely revenue-neutral C.D. Howe Institute Archived 2011-07-17 at the Wayback Machine
  3. 1 2 Coyle: Despite Tory roars, HST here to stay The Toronto Star
  4. ↑ The HST: Overcoming fears and misconceptions, Vancouver Sun August 31, 2009 http://communities.canada.com/vancouversun/print.aspx?postid=491641 Archived 2012-07-12 at archive.today
  5. ↑ Not a Tax Grab After All, Canadian Centre for Policy Alternatives http://www.policyalternatives.ca/sites/default/files/uploads/publications/reports/docs/Not_a_Tax_Grab_After_All.pdf
  6. ↑ Canada Revenue Agency, GST/HST Credit Guide
  7. ↑ "The Effect of the Harmonized Sales Tax on Consumer Prices in Atlantic Canada" (PDF). Canadian Public Policy, Vol XXVI, No. 4 2000. Retrieved 2012-11-09.
  8. ↑ "Helping Individuals and Families". 2006 Budget. Department of Finance Canada. Retrieved 2009-03-26.
  9. ↑ Ferguson, Rob (2008-01-01). "One last trim: 5% GST kicks in". The Toronto Star. Retrieved 2009-03-26.
  10. ↑ HST increased
  11. ↑ Dexter to cut HST back to 13% by 2015
  12. ↑ Nova Scotia's budget - by the numbers
  13. ↑ https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/notice297/notice297-hst-rate-increases-new-brunswick-newfoundland-labrador-questions-answers-on-general-transitional-rules-personal-property-services.html#
  14. ↑ Silver, Robert (2009-09-16). "Harper's HST revisionism". Toronto: The Globe and Mail.
  15. 1 2 "2009 Ontario Budget". Ontario Ministry of Finance. 2009-03-26. Archived from the original on 2009-03-28. Retrieved 2009-03-26.
  16. 1 2 Poll: 90% in B.C. and Ontario say HST is a government tax grab Vancouverite News Service Archived 2009-12-07 at the Wayback Machine
  17. ↑ The road to create a single tax in Ontario Canwest News Service
  18. 1 2 "HST legislated at 10 per cent". 100 Mile Free Press. 2011-05-08.
  19. ↑ Ontario Ministry of Revenue, Ontario Sales Tax Credit
  20. 1 2 3 4 BC Government HST Blog Archived 2010-05-11 at the Wayback Machine
  21. 1 2 "HST in BC - Independent Panel Releases Report". Archived from the original on 2011-11-13. Retrieved 2011-09-09.
  22. ↑ 10 simple HST myths The Globe and Mail
  23. ↑ Bostelaar, Robert (2010-08-19). "Taxpayers will see costs from HST, says think tank". The Vancouver Sun.
  24. ↑ Murrell, David (2010-08-25). "Impact of HST on Ontario and British Columbia households by income Quintiles". Canadian Taxpayers Federation. Archived from the original on 2011-08-07.
  25. ↑ Task Force Releases Eighth Annual Report Roger L. Martin, Task Force on Competitiveness, Productivity and Economic Progress Archived 2009-12-06 at the Wayback Machine
  26. ↑ Ontario's bold move to create jobs and growth Jack Mintz, The School of Public Policy
  27. 1 2 Shreck, David (2010-08-11). "Elections BC's Bizarre Decision on HST". The Tyee.
  28. ↑ "Vander Zalm's anti-HST petition hits Vancouver". CBC News. 2010-04-06.
  29. ↑ "Anti-HST team launches constitutional challenge". CBC News. 2010-07-05.
  30. ↑ HST petition can proceed, B.C. judge rules. BCTV News. Retrieved Aug20,2010.
  31. ↑ "Elections BC HST Referendum Homepage". Archived from the original on 2011-08-18.
  32. ↑ Hunter, Justine. "Campbell's stunning resignation leaves fate of party, HST up in the air". The Globe and Mail. Retrieved 8 May 2015.
  33. ↑ "British Columbia government launches public consultation process for HST". Journal of Commerce. 2011-04-20.
  34. ↑ "Feds amend law to allow B.C. to cut HST by 2 per cent". Global TV. 2011-06-09.
  35. ↑ Bailey, Ian (2011-08-26). "B.C. rejects HST in landmark referendum". The Globe and Mail. Toronto.
  36. ↑ "Ottawa to Give BC Extension on HST Repayment". HSTinCanada.com. 2012-01-11. Retrieved 2014-07-02.
  37. ↑ "Changes to Harmonized Sales Tax (HST)". Canada Revenue Agency . Retrieved 2012-11-09.
  38. ↑ "P.E.I. to introduce HST by next April". The Canadian Press. 2012-04-19. Retrieved 2012-04-19.
  39. ↑ What's Taxable Under the HST and What's Not?, Ministry of Revenue. Accessed May 28, 2010.
  40. ↑ B.C. to harmonize provincial sales tax and GST CTV News Archived 2009-08-20 at the Wayback Machine
  41. ↑ "Archived copy" (PDF). Archived from the original (PDF) on 2011-07-06. Retrieved 2009-12-07.{{cite web}}: CS1 maint: archived copy as title (link)
  42. ↑ "HST New Home Rebate - TaxChambers can help. We resolve dispute". Archived from the original on 2013-10-29. Retrieved 2013-10-27.
  43. ↑ "Ontario HST New Housing Rebate | How to Get HST Rebate". Archived from the original on 2013-10-29. Retrieved 2013-10-27.
  44. ↑ "HST New Housing Rebate". Archived from the original on 2013-10-29. Retrieved 2013-10-27.
  45. ↑ "Canada Revenue Agency/Agence du revenu du Canada". 27 November 2019.
  46. ↑ "HST New Housing Rebate - Rental Property v. Primary Place of Residence". Archived from the original on 2013-10-29. Retrieved 2013-10-27.
  47. ↑ Ontario strikes populist note to soften the HST blow The Globe and Mail
  48. ↑ Point-of-Sale Exemption for First Nations Archived 2011-07-06 at the Wayback Machine , Ministry of Revenue. Accessed February 3, 2011.
This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.