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Harmonized sales levy is the lesser of tax evils

by Vanessa on 17/08/09 at 1:54 pm

It isn’t often that political leaders take policy actions they know will be highly unpopular. The decisions by Ontario Premier Dalton McGuinty and B.C. Premier Gordon Campbell to harmonize the provincial sales tax with the federal goods and services tax are rare shows of political courage.

The unpopularity of harmonized sales tax (HST) arises almost entirely because the PST has a long list of exempted items that will now have the PST added to the existing GST.

Here in B.C., the most vocal opposition comes from the tourism and restaurant sectors, already hard hit by the recession and higher dollar. Accommodation will be protected by an offsetting elimination of the hotel tax, but services such as domestic air travel, hair care, dry cleaning, accounting and even funerals will be subject to the additional 7 per cent. New-home buyers will pay the tax on purchases over $400,000 and all homeowners will see the HST applied to cable, telephone, gardening, repairs, renovations and heating fuels.

A recent headline in the Victoria Times Colonist captured the public’s reaction: “HST slams into wall of opposition .” An Ipsos Reid survey found that 85 per cent of respondents opposed the July 1, 2010, HST implementation. And critics’ mischievous portrayal of the move as bailing out big business on the backs of consumers seems to be a dream wedge issue for the Opposition New Democrats.

It’s not that Liberal Premier Campbell couldn’t have anticipated the reaction: Mr. McGuinty has endured similar opposition since Ontario announced sales tax harmonization in May.

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