General
- Why is Ontario making the change to a harmonized sales tax?
- Would the government collect more money because of this tax?
- Is this the right time to be bringing in a harmonized sales tax?
- Won't certain things cost more?
- What is a value added tax?
Consumers
- Would I end up paying more taxes?
- Would businesses really pass on the savings?
- What would I have to pay tax on as of July 1, 2010?
Businesses
- How would this help Ontario's businesses – both large and small?
- What do businesses have to do right now to get ready?
- Will the government provide businesses with assistance to transition to the HST?
- Will I have to register to collect the proposed HST?
1. Why is Ontario making the change to a harmonized sales tax?
Our comprehensive tax package, including the proposed harmonized sales tax, would create jobs by making Ontario more competitive, reduce business taxes and provide personal tax relief.
Times have changed. We've seen the biggest global economic downturn in 80 years. If we want Ontario to remain strong, we must change too.
We need to be competitive. We need to attract investment and jobs. We need to protect those important services like health care and education we've worked so hard to build.
Many economists, businesses and investors agree that the most important thing we can do is get rid of the dual sales tax system that puts our businesses at a competitive disadvantage and, at the same time, substantially cut income tax for people, small businesses and corporations.
We have a choice: we can refuse to fix what's broken and resign ourselves to the idea that Ontario would be less competitive, or we can move forward and hold firm to the conviction that Ontario can emerge stronger than ever before.
2. Would the government collect more money because of this tax?
As a result of the comprehensive tax measures announced in the Budget, not including federal assistance, there would be an estimated overall reduction of $2.3 billion in tax revenue over four years, while 93% of Ontario taxpayers would get a personal income tax cut.
The measures announced in the Budget create a balanced tax package for people and businesses that would make our economy more competitive when we emerge from this recession.
Find out more about what the tax package means to families and businesses.
3. Is this the right time to be bringing in a harmonized sales tax?
Ontario must remain strong in the face of global economic challenges. But right now, our dual sales tax system puts our businesses at a competitive disadvantage. It's a disadvantage we can no longer afford.
Many economists, businesses and investors say that adopting a value-added sales tax like the HST is the most important thing we can do to strengthen Ontario's economy.
Together with our tax cuts, the HST would attract investment and jobs, and it would also help protect high quality public services, like health care and education, that make Ontario a better place to live.
In more than 140 countries and four other provinces, a value-added sales tax like the HST is already a fact of life. BC has recently announced it is adopting the HST. It is modern, efficient and necessary to compete in today's changing world.
We can refuse to fix what's broken and resign ourselves to the idea that Ontario would be less competitive. Or we can embrace change and do what it takes to build a stronger Ontario.
Find out more about what the tax package means to families and businesses.
4. Won't certain things cost more?
For some items and for some people, it would mean price increases – and that's why we would be providing $10.6 billion over three years in tax relief for people, which includes permanent personal tax cuts and direct payments to Ontarians.
Replacing the provincial sales tax (PST) would help eliminate the hidden sales tax that many products carry. Few people realize that the PST is charged on various business costs throughout the production of an item. This hidden tax is ultimately added into the cost the consumer pays at the cash register.
Under the proposed HST, most taxes paid on business inputs would be refunded to the business -- savings that can be reinvested and passed on to consumers.
As PST is replaced with the proposed HST, businesses, in general, would pay less tax, generating savings which they would be able to pass along to consumers in the form of lower prices.
Find out more about what the tax package means to consumers.
5. What is a value-added tax?
Right now, the PST is paid by most businesses on various costs throughout the supply chain. In other words, though you may not realize it, the PST is charged multiple times on various costs before a product reaches the store.
Under the proposed HST, most taxes paid on business inputs would be refunded to the businesses through input tax credits, generating savings from removing the current embedded sales tax — savings that could be passed along to consumers.
For example, when Newfoundland and Labrador, Nova Scotia and New Brunswick harmonized with the federal GST, cost savings were passed through to the consumer. This led to lower prices for some products.
6. Would I end up paying more taxes?
The comprehensive tax package would give 93% of Ontario taxpayers an income tax cut, which would put more money in people's pockets. Effective January 1, 2010, the first provincial income tax rate would be reduced from 6.05% to 5.05%, making it the lowest provincial tax rate in Canada on the first $37,106 of taxable income.
The province would provide $10.6 billion over three years in temporary and permanent tax relief for the people of Ontario, and $4.5 billion over three years in tax relief for businesses.
7. Would businesses really pass on the savings?
When Newfoundland and Labrador, Nova Scotia and New Brunswick harmonized their sales tax with the federal GST, cost savings to business were passed through to consumers. The same would be expected to happen in Ontario's highly competitive economic environment.
Right now, most businesses pay PST on many items which form part of the cost of doing business. That added cost of the PST is then passed on to consumers in the form of higher prices.
The proposed HST would generally eliminate this hidden PST, because most sales taxes paid on business inputs would be refunded to the business through what are called "input tax credits". These tax credits are savings for the business that could be passed on to consumers through lower prices.
A recent study by the TD Bank estimates that about 80% of the cost savings to business would be passed on in the first year the HST comes into effect, rising to 95% by the third year. The report notes that "(i)n order for businesses to generate an increase in demand for their products they will have to pass those savings onto consumers".
Find out more about what the tax package means to consumers.
8. What would I have to pay tax on as of July 1 2010?
In general, a single sales tax rate of 13% would apply to all goods and services that are currently subject to GST.
The proposed HST would not be charged on the following items that are currently not subject to PST:
- Basic groceries
- Prescription drugs
- Some medical devices
- Municipal public transit
- Health and education services
- Legal aid
- Most financial services
- Child care
- Tutoring
- Music lessons
- Residential rents
- Condo fees
Consumers would not have to pay the provincial portion of the proposed HST for:
- Children's clothing and footwear
- Children's car seats and car booster seats
- Diapers
- Feminine hygiene products
- Books (including audio books)
- Prepared food and beverages sold for $4.00 or less
- Print newspapers
Find out more about what the tax package means to families.
9. How would this help Ontario's businesses – both large and small?
Starting July 1, 2010, Ontario's businesses would deal with one sales tax instead of two, one set of rules instead of two and one level of government instead of two.
Right now, provincial sales tax is paid by most businesses at each step in the creation of a consumer product. In other words, though you may not realize it, the PST is charged multiple times during the production of a product before that product reaches the store. So it can be a tax on a tax on a tax, all hidden in the cost of a product until it gets to the consumer.
Under the proposed HST, most taxes paid on business inputs would be refunded to the business -- savings that can be reinvested and passed on to consumers.
Find out more about how businesses would benefit.
10. What do businesses have to do right now to get ready?
Some transitional rules have already been released for new housing. Additional general transitional rules for the proposed HST have also been released.
11. Will the government provide businesses with assistance to transition to the HST?
To support small businesses, Ontario will provide up to a total of $400 million in one-time transition assistance to small business in the form of a transition credit.
Most businesses, other than financial institutions, with less than $2 million in annual revenue from taxable sales, will be eligible for the Small Business Transition Credit of up to $1,000.
12. Will I have to register to collect the proposed HST?
Businesses that are registered for GST will be required to collect the HST.
To reduce the administrative burden for small businesses, Ontario will parallel the federal small supplier threshold. In general, businesses with sales under the threshold will not be required to register and collect tax.
Small suppliers that choose not to register will not be required to file a tax return and will not be eligible to claim input tax credits. If a small supplier chooses to register, it will be eligible to claim input tax credits related to its taxable supplies when it files its tax return.
Meet Minister John Wilkinson
