Harmonized Sales Tax – A Good or A Bad Change?
This issue hit all headlines recently in Ontario and British Columbia, just after it had been decided to switch these two provinces to a new taxation system. The main idea of transition from PST (Provincial Sales Tax) to HST (Harmonized Sales Tax) is to implement a regressive taxation system. This system is proved to be favourable for business investments and thus provincial growth as a whole. A lot of studies show that cascading tax systems, like PST is, have a negative impact on the economy of provinces as they slow its growth. Changes, naturally, cause a strong reaction in society and that is case. There always are supporters and opposites of a new idea.
So, what is the nature of HST?
Harmonized Sales Tax will arise as a result of combined GST (Goods and Services Tax) and PST (Provincial Sales Tax) in one single entity. The already settled date – July, 1st will mark the beginning of a new page in the economy of afore-mentioned provinces. Adoption of HST in Ontario and British Columbia predetermines its rate of 12% and 13% respectively. In general, a new tax implementation will not influence the cost of the most common products and services, for instance, home and mobile phone bills, cable television, etc. These services will remain taxed at the rate of 12% and 13% depending on the province, as it is for the time being. The upcoming change will have a negative influence on a real estate rates in the first place. Every person buying a new abode will be severely taxed. Say, you want to buy a house with a price tag of $700,000.
Let’s do the math here. Taxes for it will amount an extra $14,000. Not only new tax system will affect people aiming to buy a house but those who already own it. The cost of electricity and heating, Internet services, etc will increase by 8% as HST comes into play. Considering increased taxes for these essential things a lot of people joined together creating a strong opposition aiming to make government go over its decision again.
But on the other hand, adoption of HST will make a favourable environment for investments, creating new jobs and also higher salaries. As you spend more you will earn more. Additionally, all proceeds raised due to HST will fill the health fund, which is by all means beneficial for every citizen of Ontario and British Columbia.
And this is just a small list of all positive changes awaiting for citizens of these provinces in future with upcoming modernization of today’s economy. Obviously, if more people put things into perspective it will eventually justify their hopes.
