Wednesday, March 18, 2009

Harmonizing Retail Sales Tax and GST

There are ongoing rumours suggesting that Finance Minister Dwight Duncan may be announcing the harmonization of the Ontario Retail Sales Tax with the federal GST upon delivery of the Ontario budget on March 26, 2009.  While nothing is certain at this time, it is worthwhile to acknowledge the issues involved with a harmonized sales tax.

Harmonized Sales Tax (HST) combines both the federal Goods and Services Tax (GST) and the Provincial Sales Tax (PST) into one single, blended, sales tax. Harmonization can help governments to simplify sales tax collection. 

Nevertheless, the reality is that there are mixed feelings on the support of such initiatives in the province of Ontario.
The Federal government, think tanks, the media and industry groups have all been suggesting that Ontario harmonize.  If it is not announced in this budget, it is highly likely that Ontario will eventually harmonize.  Therefore, the following preparations should be considered today.
Contracts and transactions straddling the harmonization implementation date could result in additional costs for either the suppliers or the purchasers.  Such contracts should provide for the possibility of negotiation to ensure that all parties are fairly treated. 

While one would expect to have a transitional period, preparation is key.  Businesses will want to make sure that their long term agreements and system changes will stand the test of time so they are not left out of pocket or with any unpleasant surprises. 
James Morton
1100 - 5255 Yonge Street
Toronto, Ontario
M2N 6P4

4 comments:

penlan said...

I hope that it doesn't happen as some things that are not taxed provincially will be if harmonized & cause even greater financial hardship for many people.

Comrade One said...

It starts. Coming from a Province that has HST, I know this isn't just about ease of administration. It's about applying provincial sales tax to things such as used vehicles, hydro and heating costs. It also provides opportunities to claw back GST decreases. Simply raise the HST back to previous levels.

Maybe it's an entry requirement to the have not province club.

Anonymous said...

It particularly will make children's clothing more expensive..bad for the poor and even a Happy meal at Macdonald's under 4 dollars, will be taxed.

Beezer said...

I suspect McGuinty and honchos are attempting to sneak a tax increase by the back door on this one. Harmonize all you want, however adding numerous goods and services to the roll that were either not orginally PST taxed or were PST taxed at a lower rate than the 8% is an insult to people's intelligence. This is inexcusable and if this goes through, people will eventually wake up when they start paying on necessities such as heating fuel, gas at the pumps, home maintenance, etc. You will reap the rewards of this ill-conceived budget item at the next election by going down to defeat.