According to Clark the changes the party is proposing are “bold” and “smart” modifications that will be made public within the next two weeks. These changes however, may prove to be too little too late.

The opposition party is skeptical that consumers who have been hit with paying an average of $250 more a year because of the tax will be persuaded to vote affirmatively regardless of the changes Clark proposes. According to Clark, these changes will “[...] lighten the load for families” but will have to fall within the provincial jurisdiction.

The federal government has not shown any interest in negotiating the terms of B.C.’s HST until 2012 which leaves Clark in a bit of a quandary over what can be done. Some analysts suggest that Clark start with adding more exemptions to the HST including restaurant meals and haircuts or reducing the overall percentage, while B.C.’s NDP leader Adrian Dix suggests the HST be scrapped altogether. Dix claims that no change to the tax will be able to alter the public’s opinion of a jaded party’s leadership stating that “the Liberal party is out of ideas and out of gas.”

Clark’s efforts may seem last minute to make the HST more palatable but for some it may also be somewhat confusing. A mere few months ago Clark was ready to ditch the tax in favor of reverting back to the PST/GST system even going so far to oust former finance minister Colin Hansen due to his involvement with implementing the HST. Now, Ms. Clark is set on promoting the tax to achieve a favourable outcome in the referendum.

The Independent Panel, town-hall style meetings and promotional materials presented to residents, while seemingly unbiased are sure to have subtext aiming towards the anticipated provincial election; proving the Liberals are seeking to earn more than the public’s vote on the HST.

Those are the elements that didn’t experience a change in the amount that is taxed.  Hotel rooms were subject to 5% GST and 5% PST prior to Harmonized Sales Tax. Under HST hotel rooms will be taxed at the full 13% HST moving forward. Taxi services used to be charged GST, but under HST that will change to 13% HST. Going camping? Your camp site fees are now taxed at 13% HST, a 7% increase comparing to the 5% GST that used be. Lastly, domestic air travel used to be subject to only a 5% GST – under Harmonized Sales Tax that changes to a 13% HST.

The question remains – will Harmonized Sales Tax help airlines, campground owners and taxi companies reduce their operating costs enough to lower prices at least 7%? If that doesn’t happen, the consumer’s fears become reality – prices are increasing. If the HST allows businesses to lower their service prices, well then the government is correct. Time will tell which group is correct – if you have any evidence of price changes in these sectors please post your thoughts below.

Maintenance services home-owners often take advantage of, such as lawn care, house cleaning, renovations services and major appliance repair (fridges, stoves, etc) will now be subject to 12% HST instead of the 5% GST. Repair of electronic items such as stereo equipment or computers was always subject to 5% GST and 7% PST, so the new 12% HST doesn’t change the amount of tax due.

Home insurance remains exempt from HST. Residential heat and electricity services is subject to the 12% HST, but a 7% Residential Energy Rebate applies to the PST portion of the tax, which reduces the total tax paid to 5%.Before HST came into play there was a small Innovative Clean Energy levy added to electricity bills which has now been eliminated.

Other Resources:

Ontario HST on Home Services

Very Brief Overview

The HST is a combination of the PST and the federal GST. It will be collected and redistributed to the provinces by the federal government. The HST varies in its rate and exemptions between the provinces, it’s set to 13% in Ontario and 12% in British Columbia. Learn more about Ontario HST exemptions and BC HST exemptions.

Its purpose
To stimulate the economy by lowering the tax on raw materials and production, in an effort to increase investment.

Opponents
Opponents often look at the short term effects, arguing that consumers face an immediate increase in the cost of many formerly exempt goods and services, including haircuts, bicycles, restaurant meals and health club memberships. There is also a concern that the HST will have long-term effects on service-based industries as a result of a decrease in consumer spending and because business will not adjust their prices to included the added savings (many in an effort to offset the decrease in consumption).

Proponents
Proponents agree that prices will increase in the short term, but argue the HST will ultimately lead to an increase in investment, which in turn will mean more jobs and a stronger provincial economy in the future. The HST will stimulate the economy and make provinces more competitive by eliminating the retail sales tax currently hidden in the costs of goods purchased by businesses. Top economists around Canada support the HST arguing that sales tax harmonization is proven to stimulate investment and will to long-term lead to economic growth.

Unaffected items (currently charged 5% GST and 8% PST):

• Cable television services
• Mobile phones services
• Home phone services
• Home appliance repair services (stoves, refrigerators, etc)

Items that will jump from 5% GST to 13% HST:

• Electricity and heating services
• Internet access services
• Electrician, Plumbing and Carpentry services
• Landscaping, lawn care and private snow removal services

Other Resources:

BC HST on Home Services

In British Columbia, clothing for children, including footwear, will be HST exempt; only 5% GST will be charged. The good news is disposable diapers, which are currently taxed at 12% with GST and PST will be HST exempt after July 1st. This means new parents will save 7% on their diaper purchases post-HST. One of the more  notable changes in the area of clothing for children is all adult products will be subject to the 12% HST – this means parents can no longer claim an adult product is for a minor to save the 7% PST.

A number of clothing related services will have to endure a 7% tax increase with HST. Shoe repair, tailoring, dry cleaning and clothing rentals will all increase from 5% GST to 12% HST. Make sure you get all your dry cleaning done at the end of June!

Ontario HST won’t apply to apply goods and services as of May 1, 2010. It only applies to goods and services that straddle or are used after the July 1st implementation date.

Here are some handy HST transition examples:

• If someone purchases landscaping services for May 1, 2010 – September 30, 2010, GST is charged for May and June and HST is charged for July onwards.
• If someone purchases Stratford Shakespeare Festival tickets after May 1, 2010, and the tickets for a performance in August, they will pay HST on the tickets.
• If someone purchases a one-year gym membership on May 1, 2010, they are charged GST for May and June and HST for July – onwards. Ontario’s transitional rules are the same as those in British Columbia and are similar to those used in the Atlantic Provinces and Quebec, as well as those used when the GST was introduced.

General HST Transitional Rules for Services:

The HST will generally apply to a service to the extent that the service is performed on or after July 1, 2010. The HST will generally not apply, however, to a supply of a service if all or substantially all (90 per cent or more) of the service is performed before July 2010.

• In May 2010, a person pays for seasonal yard maintenance service, 50 per cent of which will be performed after June 2010. The HST would apply to 50 per cent of the consideration for that service and the supplier would account for the Ontario component of the HST in the GST/HST reporting period of the supplier that includes July 1, 2010.

Leases and Licences

The Ontario HST will generally apply to a supply of property by way of lease, licence or similar arrangement for the part of a lease interval that occurs on or after July 1, 2010. The HST will not apply to a supply of property by way of lease, licence or similar arrangement if the lease interval begins before July 2010 and ends before July 31, 2010.

• On May 1, 2010, a lease payment becomes due and is paid for a site in a recreational campground. The lease interval is six months (May 1, 2010 through October 31, 2010). The part of the payment for the months of May and June would not be subject to the HST but the part of the payment for the months of July, August, September and October would be subject to the HST.

HST and Residential Housing

The Ontario HST will apply to a builder’s sale of a newly constructed or substantially renovated residential complex where the written agreement of purchase and sale is entered into after June 18, 2009, and both ownership and possession are transferred after June 2010.

If either ownership or possession is transferred to the purchaser before July 2010, the HST will not apply.

New Housing Rebate

An Ontario new housing rebate will be available for some of the provincial part of the HST paid by an individual on the purchase of newly constructed or substantially renovated housing for use as the primary place of residence of the individual or a relation of the individual.

The new housing rebate will be equal to 75% of the provincial part of the HST paid, up to a maximum Ontario rebate amount of $24,000. It will be available for the same types of residential properties for which a GST new housing rebate is currently available.

• For a $500,000 new home, once the new housing rebate take effect on July 1, 2010, the Ontario portion of the HST would be $40,000 and the Ontario new housing rebate would be $24,000, resulting in a net tax to the homebuyer of $16,000 for the provincial portion of the HST. Some Special Transitional Rules

Subscriptions to Magazines

• No HST if paid before July 1, 2010

Prepaid Funerals

• No HST if contract entered into in writing before July 1, 2010

Passenger Transportation Services

• No HST if continuous journey begins before July 2010

Freight Transportation Services

• No HST if continuous freight movement begins before July 2010

Passenger Transportation Passes

• No HST if pass period begins before July 2010 and ends before
  August 2010

Small Supplier Threshold

To reduce the administrative burden and complexity for small business, Ontario will parallel the GST small supplier threshold. Businesses with total taxable sales of $30,000 or less based on four previous calendar quarters ($50,000 or less for a public service body) will not be required to register for GST/HST purposes and collect the HST, subject to limited exceptions. Those that choose not to register will not be required to file a HST return. Those that choose to register will collect the HST and will be eligible to claim ITCs.

How does this work?

Currently with the embedded PST system businesses are paying taxes on most of their inputs that go into producing their goods or service. These embedded taxes are factored in to the price consumers pay on the final product or service. The HST system would reimburse businesses for all PST on inputs; naturally this should result in a price reduction of the final product.

What ‘inputs’ are exempt for a restaurant?

• fridges, stoves, freezers, dishwashers and other appliances
• energy for heat, cooking and operating equipment and lighting
• cleaning supplies, such as rags, soaps and cleaning solutions,
• cash registers, computer hardware and software
• equipment repair and maintenance services
• paper towel and toilet paper
• customer food bills and menus
• cloth napkins, table cloths, tray covers and placemats
• pots, pans, kitchen implements and knives
• plates, bowls, glasses, cups, other reusable dishes, and cutlery
• coffee machines, blenders, mixers and other small appliances
• free-standing equipment such as juice dispensers, ice machines and coolers
• office equipment, supplies and furniture
• advertising materials, such as flyers and brochures
• items purchased to give away as free promotions

While the Harmonized Sales Tax will encourage new business startup, opponents of the HST system have pointed out that the savings associated with the new tax will not be realized for some time by many businesses that are already operating. For example, a restaurant established before the HST system will have already paid the embedded PST on their equipment and will not immediately benefit from the new streamlined tax. With recent increases to the cost of food and the slowing economy, restaurants operating on small budgets are already struggling to keep prices under control to avoid scaring consumers away.

Conversely, larger businesses and franchises are in a better position to absorb short term losses associated with lowering their prices, and can afford to raise wages and increase investments. Critics say this could effectively cut out smaller, locally established businesses from competing with larger corporations.

“I think it’ll be catastrophic and everyone in July will buckle in their straps and stop spending money, and we need people to spend money for the economy.”

Reported by the Toronto Sun, this means the average cost of breast implants in Ontario will go up $400-$800 dollars. The average face-lift in Ontario will cost $1,200-$1,600 more with Harmonized Sales Tax.

There are scenarios where cosmetic surgery is exempt from HST, in the case of reconstructive surgery. The federal government can review cosmetic surgeries on a case by case basis to determine if they are “medically necessary” in which case the surgery will be HST exempt.

Laser hair removal, botox, tattoo removal and cosmetic dentistry will all see their prices increase with BC HST and Ontario HST this summer after July 1st.

“The OMHA and its member organizations [OMHA] are non-profit organizations [NPO] and public sector bodies for the purposes of the Excise Tax Act. As a result, as long as their programs are primarily (greater than 50%) geared towards children 14 years and under, they will be exempt from charging GST and HST on its program fees. Further, the OMHA must directly provide its member players with a program that consists of supervised instructional classes or activities involving athletics or other recreational activities.”

The legislation for Ontario HST continues to be adjusted as the impact of HST is considered, but from what HST information is available today it would seem that all non-profit organizations that provide a service primarily to sport activities for children under the age of 14 will be HST exempt.