Andy Shen

In around two weeks, the tax­a­tion sys­tem of British Colum­bia and Ontario will be changed. The cur­rent GST (Goods and Ser­vices Tax) and the PST (Provin­cial Sales Tax) will be merged into the HST (Har­mo­nized Sales Tax). The HST is not a new tax. The per­cent­age of tax­a­tion will still remain 12%, the low­est HST per­cent­age in Canada!

This sales tax is imple­mented by the Provin­cial gov­ern­ment of British Colum­bia and the Fed­eral gov­ern­ment of Canada. This form of tax­a­tion will begin on July 1, 2010 – the 143rd birth­day of Canada.

The Har­mo­nized Sales Tax is a more trans­par­ent form of tax­a­tion. Under the PST/GST sys­tem, PST is paid at every trans­ac­tion. The cost of PST paid in those trans­ac­tions are car­ried to the price of the final prod­uct. When you buy the final prod­uct, you will have paid more than one level of PST on top of the GST and PST that you pay at the store. The HST elim­i­nates embed­ded PST and you will only pay one sales tax – when you buy it at the con­sumer level. Please feel free to see this chart for more explanation.

The BC gov­ern­ment esti­mates that intro­duc­ing the HST to replace the PST and GST will remove over $2 bil­lion in costs for BC busi­nesses. Instead of doing two tax forms, busi­nesses will only have to fill out one tax form. This sav­ing to BC Busi­nesses will most likely be passed on to the employ­ees (more jobs, higher wages and salaries) and con­sumers (lower prices due to competition).

The HST will com­pletely elim­i­nate the 10% liquor con­sump­tion tax and the 7% to 10% lux­ury tax on auto­mo­biles. This means that you will save money when you buy your next batch of alco­hol at the liquor store, bar or pubs. It will also mean that you will save money when you buy your next BMW, Mercedes-Benz and other lux­ury cars.

Stud­ies have shown that coun­tries that have not embraced a VAT tax­a­tion sys­tem have higher prices at the domes­tic con­sumer level and higher prices at the export level mak­ing indus­tries less com­pet­i­tive. British Colum­bia is the gate­way of Canada to Asia. We need to make our goods and ser­vices more com­pet­i­tive to attract invest­ments from other countries.

Com­par­i­son of Sales Tax in Canada

In Canada, you pay 5% GST regard­less of which province you are in.

• British Colum­bia has 7% PST, 10% liquor con­sump­tion tax, and a 7% to 10% lux­ury tax based on pur­chase price.
• Alberta has no provin­cial sales tax but has a 4% PST on lodging.
• Saskatchewan has 5% PST and a 10% liquor con­sump­tion tax.
• Man­i­toba has a 7% PST.
• Ontario has a 8% PST, 10% enter­tain­ment and alco­hol tax at restau­rants, 12% on alco­hol at retail stores. It has a 5% PST on lodg­ing. Que­bec will also intro­duce the HST on July 1, 2010 but with 13% as opposed to 12.
• Que­bec has a 7.5% PST applied to the price of the prod­uct and/or ser­vice and the GST. The PST will be increased to 8.5% on Jan­u­ary 1, 2011 and will increase again to 9.5% on Jan­u­ary 1, 2012.
• Prince Edward Island has a 10% PST applied on top of the price of the prod­uct and/or ser­vice and the GST.
• New Brunswick has a 13% HST.
• Nova Sco­tia has a 13% HST but will be increased to 15% on July 1, 2010.
• New­found­land and Labrador has a 13% HST.

Prior to the Stephen Harper Con­ser­v­a­tive gov­ern­ment, the GST and HST were 2% higher than the current.

Rebates and HST Credits

In British Colum­bia, low income fam­i­lies (under $25,000) and indi­vid­u­als (under $20,000) will receive a $230 credit. This is a sig­nif­i­cant increase from the cur­rent GST rebate, paid the fifth day of Jan­u­ary, April, July and October.

Used homes are not sub­ject to the HST. new homes over $525,000 will receive a max­i­mum rebate of $26,250. New home buy­ers will not pay more in taxes than they would have under the old embed­ded PST system.

Exemp­tions

All goods and ser­vices exempted from the GST will be exempted from the HST:

• basic gro­ceries
• pre­scrip­tion drugs
• res­i­den­tial rent

In addi­tion, the BC provin­cial por­tion of the sales tax that are exempt are:

• Gaso­line, Ethanol, Diesel, Bio-diesel when used in motor vehi­cles as well as loco­mo­tive fuel used for trains, marine diesel used for boats, and avi­a­tion fuel and jet fuel used for aircrafts.
• Books
• Children-sized cloth­ing and footwear
• Children’s car seats and car booster seats
• Dia­pers
• Fem­i­nine Hygiene Products

Zero-Rated Goods and Ser­vices (you pay 0% HST)

• basic gro­ceries such as milk, bread, and vegetables.
• agri­cul­tural prod­ucts such as grain, raw wool, and dried tobacco leaves.
• most farm livestock.
• most fish­ery prod­ucts such as fish for human consumption.
• pre­scrip­tion drugs and drug-dispensing fees.
• med­ical devices such as hear­ing aids; heart-monitoring devices; hos­pi­tal beds; breath­ing appa­ra­tus; asth­matic devices; pre­scrip­tion eyeglasses/contact lenses; arti­fi­cial eyes; arti­fi­cial teeth such as den­tures, crowns and bridges, ortho­don­tic appli­ances; aids to loco­mo­tion such as a chair, com­mode chair, walker, wheel­chair lift or other aid to loco­mo­tion for use by an indi­vid­ual with a dis­abil­ity; patient lifters; wheel­chair ramp; portable wheel­chair ramp; mod­i­fy­ing motor vehi­cles to adapt the vehi­cle for the trans­porta­tion of an indi­vid­ual using a wheel­chair; pre­scrip­tion orthotic and orthopaedic devices; prosthesis/devices; canes or crutches; arti­cles for blind indi­vid­u­als; guide dogs for blind indi­vid­u­als and hear­ing ear dogs; sup­plies and ser­vices related to med­ical and assis­tive devices.
• exports

Exempt Goods and Ser­vices (you pay 7% HST)

• imports of zero-rated goods (goods that are specif­i­cally taxed at zero per cent in Canada, such as pre­scrip­tion drugs)
• goods imported by a char­ity or pub­lic insti­tu­tion that have been donated to the char­ity or institution
• used res­i­den­tial housing
• long-term res­i­den­tial accom­mo­da­tion (of one month or more), and res­i­den­tial con­do­minium fees
• some sales of vacant land or farmland
• most health, med­ical, and den­tal ser­vices per­formed by licensed physi­cians or den­tists for med­ical reasons
• child-care ser­vices (day-care ser­vices for less than 24 hours a day) for chil­dren 14 years old and younger
• personal-care ser­vices for chil­dren, under­priv­i­leged indi­vid­u­als, or indi­vid­u­als with dis­abil­i­ties, when pro­vided by a per­son oper­at­ing an estab­lish­ment for these indi­vid­u­als, in either insti­tu­tional or non-institutional settings
• bridge, road, and ferry tolls (ferry tolls are taxed at zero per cent if the ferry ser­vice is to or from a place out­side Canada)
• legal aid services
• many edu­ca­tional ser­vices, such as courses from a voca­tional school that lead to a cer­tifi­cate or a diploma to prac­tise a trade or a voca­tion; or tutor­ing ser­vices for an indi­vid­ual who takes a course approved for credit by a school author­ity or the edu­ca­tion ser­vice fol­lows a cur­ricu­lum des­ig­nated by a school authority
• music lessons
• most food or bev­er­ages sold in an ele­men­tary or sec­ondary school cafe­te­ria pri­mar­ily to stu­dents of the school and most meal plans pro­vided in a uni­ver­sity or pub­lic college
• most ser­vices pro­vided by finan­cial insti­tu­tions such as arrange­ments for a loan or mortgage
• arrang­ing for and issu­ing insur­ance poli­cies by insur­ance com­pa­nies, agents, and brokers
• cer­tain goods and ser­vices pro­vided by non-profit orga­ni­za­tions, gov­ern­ments, and other pub­lic ser­vice bod­ies, such as munic­i­pal tran­sit ser­vices and stan­dard res­i­den­tial ser­vices such as water distribution
• most goods and ser­vices pro­vided by charities.