Six things you should know about the HST

Editor’s Note: After the government of Ontario introduced enabling legislation for the HST we gave politicians from all three parties the opportunity to comment on the bill. MPP Lisa MacLeod’s provided us with this article in lieu of commentary. It was initially published in the National Post on November 19th 2009.

On July 1, 2010, the Ontario Government plans to introduce a new Harmonized Sales Tax (HST), which would combine Canada’s Goods and Services Tax and Ontario’s Provincial Sales Tax into a unified sales tax. The HST will directly increase the tax burden on middle-class Ontario families. Indirect impacts will drive up the cost of living further still.

What is most concerning are the hidden details about this tax that the current government seems content to obscure. Below, we have summarized the six things that Ontario taxpayers need to know about the HST before it is imposed by Dalton McGuinty’s Liberal government.

1. Under the HST, Ontario surrenders its constitutionally-granted taxation powers to the whims of future federal governments.

Right now, Ontario enjoys direct taxation powers granted under the Canadian constitution. However, under the HST plan, Ontario will give up its sales-tax powers to Ottawa through the federal Excise Tax Act. Once the HST is enacted, fundamental decisions about what is, and is not, subject to sales taxes will not be made in the Ontario legislature but will instead be made in Ottawa. It is not hard to foresee the day when a federal Minister of Finance could decide the fate of Ontario businesses when there is a tax dispute. It is also possible that the federal Excise Tax Act will be amended, regulations will be passed or administrative practice will change without Ontario’s input or approval, in which case Ontarians will become victims of taxation without representation.

2. Under the HST, it is likely that tax-included pricing, or hidden taxation, will come to Ontario

Many of us prefer to know just how much of our money is actually being directed to government. Yet the moment Ontario joins the HST, an obscure piece of federal legislation kicks in that will allow sellers to conceal just how much tax you are paying on the products you buy. The taxpayers of tomorrow will be denied straightforward information that is taken for granted by taxpayers today.

3. There is no evidence that harmonized taxes work in other federal jurisdictions.

The McGuinty government promotes the notion that 130 other countries have adopted a “value-added tax” such as the HST. This is misleading.

The HST represents more than just a single value-added tax –it represents a blending of sales taxes between two levels of government. No other developed country has successfully imposed a joint value-added tax at both the federal and state/provincial levels of government. (In any case, Canada’s federation is dissimilar from that of many OECD countries.) Ontario needs a made-in-Ontario tax regime that reflects the realities of the Ontario economy.

4. There will be hidden costs for Ontario businesses to comply with the HST. Any business that has been audited will understand that the administrative burden associated with tax-law compliance is substantial. Any change to tax laws forces businesses to spend money to both understand the new regime and live up to their obligations under it.