Perhaps you were all waiting for me to address this topic, so I will unhappily oblige.
I expect it to spark debate, although I’m fairly certain that all the debaters will situate themselves on the same side of the fence.
Here is question to get us started: Who’s worse, Dalton McGuinty or David Miller?
Remember when Mel Lastman made those ridiculous comments about seeing himself in a “pot of boiling water with natives dancing around him” before his trip to Kenya?
Remember when Mel Lastman called in the Canadian Armed Forces during a blizzard and actually had TANKS rolling down Yonge Street? (I saw this first hand)
Well, who among us ever thought that we would look back at Mel Lastman, comparing him to some of our current politicians, and say, “Hey….that guy was actually pretty good!”
I’m so sick of both Dalton McGuinty and David Miller, and I fear that we are stuck with both of them.
Terrible decision after terrible decision plagues the residents of Ontario and Toronto respectively, and the latest crisis is the harmonization of the GST and PST, thanks to McGuinty. David Miller is off the hook….for today…
The backlash of this latest political fiasco hasn’t quite reached the same level as that of the AIG bonus payments in the United States, but maybe we have yet to feel the brunt of the public’s disdain.
While I’m sure there are a-million-and-one reasons why the tax harmonization is a terrible idea, I’m here to examine this from a real estate perspective. I implore my readers to comment freely on the issue to their hearts’ content.
First and foremost, and this is something that I’ve been dealing with a lot: THERE WILL NOT BE HST ON THE PURCHASE & SALE OF CONDOS AND HOUSES.
Please read that again: There will NOT be any GST, PST, or HST payable when you purchase a house or condominium after July 1st, 2009.
Can you imagine if there was?
Imagine paying $300,000 for your new condo, and having 13% added to the price. “That’ll be $339,000,” says the man at the cash register who looks a lot like a dweeb named Dalton.
Or imagine purchasing your Rosedale dream home for a quaint $3,500,000, and tacking on $455,000 in sales tax!
There has never been GST payable on the sale of existing houses and condos, therefore the harmonization of the GST & PST will not result in tax payable in the future.
There is, however, GST payable on the sale of new homes and condos.
Let’s look at these individually, first with houses.
If you were to purchase a new house from a builder, there would be GST applicable on the sale. However, the builder’s often operate in different manners, and in most instances the tax is “included in” the purchase price.
For example, I sold a house for $1,060,000 two years ago (GST was 6% at the time) where the builder claimed, for CRA purposes, that the purchase price was $1,000,000, and he charged 6% GST on the sale. In actual fact, the sale was $1,060,000, and he knew the buyer would never agree to tack on another 6%, so he took the hit himself.
This is the way it works most of the time with individual builders, however if you were dealing with a huge developer like Mattamy Homes in a residential sub-division, I suspect it might be different.
When purchasing a new condominium in pre-construction, there would be GST applicable on the sale unless you can show that this is your primary residence. I’m currently battling with a developer (and my own lawyer!) trying to prove that my latest condo purchase is in fact my primary residence, despite the appearance of a 35-year-old, female tenant occupying the premises.
So, imagine that the 5% GST that I’ll undoubtedly have to pay all of a sudden becomes 13%.
THIS is where real estate will take one on the chin with the harmonization of sales tax.
Will builders continue to absorb the HST cost when they sell new houses?
Will condominium developers continue to be somewhat lenient in their assessment of who qualifies for the HST rebate, and who will have to pay it upon closing and seek reimbursement from the government?
Only time will tell how the new tax plays out.
One place where there is no grey-area, however, is with respect to real estate commissions.
Real estate is a “service,” so it goes without saying that Goods And Service Tax is applicable on a real estate commission.
You sell your $300,000 condo and pay a standard 5.0% commission, or $15,000. But what sellers don’t often realize is that there is 5% GST applicable on the $15,000 sales commission, or $750. Now with the harmonized sales tax, the 5% GST turns into 13% HST, and that $750 increases to $1,950.
So the $15,000 sales commission is really $16,950.
Every penny counts!
While new home sales and real estate commissions are the two main areas in which the new HST will affect real estate, there are a whole slew of spin-off industries that will be affected.
Will sellers still pay for home-staging with an 8% premium attached to it?
Will buyers still renovate their houses as they had planned to do before the new tax?
How about legal fees?
Appraisals?
Home inspections?
Any service industry which is related to the industry of real estate will be affected, and this will in-turn make it more costly and difficult to purchase a house in Ontario.
Here is where I will become a little biased, so beware.
As an industry, we have already endured the unnecessary burden of double-taxation in Toronto with Miller’s new Land Transfer Tax.
We have become the gatekeeper for FINTRAC and their anti-money-laundering campaign, adding mounds of paperwork and obligations to our real estate transactions.
McGuinty has made some noise about bringing in Green Energy Audits, which would hold up every single real estate transaction in Ontario, all as a rouse to convince the public that “something must be done.”
And now, we are going to have an additional 8% tacked on to all new home and condo sales, real estate sales commissions, and services that come hand-in-hand with buying or selling real estate.
It’s just another roadblock for the real estate industry, but what else is new?
I’m curious to know HOW the harmonization of our sales taxes is actually going to help the economy. McGuinty’s $1,000 PST rebate is a farce when you consider how many thousands and thousands of dollars individuals will incur.
Thoughts?
Opinions?
dave
at 8:12 am
$14 billion budgeted deficit for Ontario next year. Actual deficit? Prob $20b+. There’s only two ways to eventually pay it down – more taxes, or less spending. In the case of the harmonized tax, I think the intent was as much to improve efficiency and simplify administration of the two seperate taxes (currently twice the work) as it was to tax new things.
zorro
at 8:35 am
“THERE WILL NOT BE HST ON THE PURCHASE & SALE OF CONDOS AND HOUSES.”
There will be on new houses starting at $400k. You are misleading people with that statement.
Riley
at 10:39 am
McGuinty & Miller firmly believe that if you have to ask the price, then you shouldn’t be buying. Politicians dream up expensive social programs for the poor and un-propertied. These are the great unwashed who vote for them in droves, and policiticians impress them by taxing the property-owners and the middle class. This is a fact of life.
David Fleming
at 11:37 am
Zorro – read further.
For the blanket statement people are making, “There will be HST on houses & condos,” I’m saying that isn’t the case.
As I wrote further down, there WILL be taxes on NEW properties, but the tax is not a blanket covering the market as a whole.
Even within the realm of new properties, the new HST is still uncertain. As I mentioned, many builders include the taxes in their sale prices, and many new condo buyers are exempt.
Duncan
at 8:32 pm
It’s totally crazy… and yes Home Staging will be affected, this also means that to paint your house, or move your belongings will also be taxed an additional 8%.
I know OREA has sent out a petition and now so is the Canadian Staging Professionals… I hope others follow suit.
Well done on the article.
Chuck Charlton
at 4:01 pm
I wrote a letter to my MPP – here it is, along with his (in my opinion GREAT) response:
Mr. Ted Chudleigh
MPP – Halton
Queen’s Park
Rm 420 Main Legislative Building
Toronto
M7A 1A8
Dear Mr. Chudleigh
As a REALTOR® in your riding, I’m writing today to express my concern about the possible implementation of a harmonized sales tax in the province of Ontario.
As you know, the Premier has openly mused about the possibility of harmonizing the goods and services tax with the provincial sales tax and has done nothing to discourage speculation that harmonization may occur at some point in the future.
If that happens, it will have a devastating effect on the housing market, both new and resale.
I’m sure you’ve seen recent studies done by the Building Industry and Land Development Association indicating that harmonization would add tens of thousands of dollars to the cost of new housing in Ontario.
But harmonization would also have a dramatic negative effect on the resale housing market as well.
For example, harmonization would result in provincial sales tax being applied to legal fees, appraisal fees, real estate commissions, moving expenses, home staging services, landscaping and more services usually associated with real estate transactions. In addition, harmonization would result in the goods and services tax being applied to items such as mortgage insurance premiums and title insurance fees.
As you know, the real estate market has been hit hard by the current recession with unit sales dropping 25-50% in many parts of the province. Now is surely not the time to impose new taxes on the real estate sector when we need economic stimulus to grow the Ontario economy.
Please tell Premier McGuinty and Finance Minister Duncan that harmonization is bad for the housing market, bad for the Ontario economy and bad for consumers wishing to buy and sell homes in Ontario.
Sincerely,
Chuck Charlton
Royal LePage Meadowtowne
=========
Reply from Mr. Chudleigh:
Dear Mr. Charlton,
Thank you for your letter on the proposed harmonization of the GST and PST.
Once again Dalton McGuinty promised no tax increases and he broke that promise.
The harmonization of these taxes will vastly increase taxes paid by every Ontarian, as it is applied to a wide variety of goods and services that have only attracted one of these taxes in the past. It is absolutely the wrong approach as we sink into a deep economic decline. Reducing the tax burden on business has its advantages but cannot be accomplished on the backs of consumers. We need broad based tax relief, not ever higher taxes to pay for ever higher spending.
The McGuinty Liberals are simply bribing people with their own money. This plan will deliver $1,000 for most households to hush up dissent on the tax grab and to try to purchase votes in the next election.
The Liberals should be ashamed of themselves. With program spending almost double what it was in 2003 they’ve run out of your money to spend and now they want more – even if it hurts.
Sincerely,
Ted Chudleigh
MPP Halton
David Fleming
at 11:28 pm
Chuck – thank you so much for sharing this!
I’m still baffled by McGuinty, and baffled by the new tax.
The worst part, in my mind, is that when new legislation is enacted by our governments, it’s rather impossible to undo.
Brian Mulroney brought GST into effect on January 1st, 1991. Jean Cretien made much noise about removing it, and never did.
Here we sit, some eighteen years later, and the tax has been rolled back from 7% to 5%.
That took EIGHTEEN years.
Once this new PST/HST comes into effect, it will never be undone.
The government will grow far too accustomed to receiving the additional tax revenues to ever give them up.
Oh, and it’s nice to hear that FUNERALS will not be exempt from the new tax.
McGuinty is a class act…
Greg
at 7:28 am
The whole thing is ridiculous. I’m all for a harmonized tax, but to make the proposal without LOWERING the total percentage is just brazen and greedy. Harmonize the tax, set it at 10% and I think everyone would say ‘FINE.’
I’m in the service industry, a small business, and quite frankly this 8% price hike could put me under.
It sounds like it will have a similar effect on a lot of the activity in real estate – especially the small fish.
Damir
at 9:56 am
OMFG!! More taxes!!?!?!? We are moving towards a commie government. People don’t see it unless you’ve lived in one. And what are we paying these taxes for the ‘new great depression’, inneficient govt, lousy roads, lazy unemployed, and politicians’ benzs.
No wonder people are hiding income left right and centre.
dave
at 2:38 pm
???
Don’t you people get it? The world is broke.
We cannot afford to pay for everything that everyone thinks they are entitled to have. Further, with the demographic bulge of the boomers heading to retirement we will have decreaased productivity, higher medical costs, and fewer workers per retiree.
Please explain your proposal for how we solve this problem without more taxes?
And if you think it is “bad” now…well wait until it comes time to pay for all the upcoming stimulus spending.
You don’t like the Canadian tax system? You think it is communist perhaps??
Well, take a look at the US/UK/Ireland where they are each running a 12%+ deficit this year (!!), and compare that with the Canadian 5% (Fed+Prov).
You should all be thanking your lucky stars you are one of the 35m here.
Seriously. Get a grip.
Ang
at 6:20 pm
Please go and sign this Petition to Stop this!
Please send your concerns to each and every Liberal MPP!!
We need to have our voices heard!
Please pass on these links to everyone!
ipetitions.com/petition/Stop_HST_Ontario/signatures-24.html
Krupo
at 10:17 pm
Though you have to be amused at PCs like Ted Chudleigh who feign outrage when this was also a policy platform of Mr. Tory… they must be secretly glad someone else is taking the heat for this.
For small business owners the recovery of 8% PST when merged into HST is another upside – hurray for Input Tax Credits!
DRG
at 3:39 am
Hire the Tamils to organize a protest….your petitions will not work !!! SAD TO HAVE TO SAY IT
Once passed it will not be reversed
SHUT DOWN THE 401 and the people will listen
Where is the media in this ?
WHY IS THE MEDIA SILENT?
JCI
at 7:26 pm
I AM STRONGLY OPPOSED TO HST FOR MANY REASONS.
1) In answer to your question… McGuinty or Millar? Neither. They are on the same side as far as I am concerned.
2) I wish there was a website for ALL Canadians to express their views about the possible upcoming HST.
3) Consider the natives. They traded land in promise in NEVER having to pay tax. This would certainly affect them. This treaty should certainly be honoured. Once again, politicians going back on their word. Do they think that after about 200-300 years, the contract is null and void?
4) Who will benefit from the HST? Definitely not the average working “Joe Canadian”, nor the natives, nor the seniors on a fixed income.
5) Who benefits? The politicians want a raise!
6) Why in H*** would any normal, sane government increase taxes, from 0-13%, as the country is trying to dig it’s way out of a recession? See option 5.
IS THIS A TAX GRAB FOR THE POLITICIANS WHO WANT MORE MONEY? WHAT ABOUT THE LOWER AND MIDDLE INCOME CONSTITUENTS? They obviously don’t care about anything except their own pocketbooks!
I WILL CERTAINLY BE VOTING OTHERWISE IN THE NEXT ELECTION…
AND>>>>
I AM SURE MOST CANADIANS WILL.
The party that WILL come into power, IS THE PARTY who ABOLISHES THE HST and show that they care more about Canadians (natives and immigrants.. we are ALL immigrants if we aren’t native) . iF THEY AREN’T WILLING TO ABIDE BY AN OLD NATIVE TREATY, HOW CAN WE TRUST THEM WITH OTHER AFFAIRS?
Sofia Akexa
at 6:35 am
Zorro – read further.
For the blanket statement people are making, “There will be HST on houses & condos,” I’m saying that isn’t the case.
As I wrote further down, there WILL be taxes on NEW properties, but the tax is not a blanket covering the market as a whole.
Even within the realm of new properties, the new HST is still uncertain. As I mentioned, many builders include the taxes in their sale prices, and many new condo buyers are exempt.GST Full Form