New HST taxes meals, new homes and haircuts
B.C. consumers will soon be paying much more tax on items that were previously exempt from the provincial sales tax, including big-ticket items like real estate, as part of the new harmonized sales tax.
Premier Gordon Campbell announced Thursday that the new sales tax, which will combine the five per cent GST and the seven per cent PST into a single 12 per cent levy called the HST, will take effect in July 2010.
Under the new tax, consumers will pay a levy equivalent to the GST plus PST on restaurant meals, airline tickets, funerals and haircuts — all items that were previously exempt from the PST.
New tax hit on real estate
But the biggest tax hit could be on those who buy new homes, which were previously exempt from the PST but not the GST.
The province will offer partial rebates of five per cent to a maximum of $20,000 on new homes. But someone buying a new $800,000 home — roughly the average price for new house in Vancouver — will still pay an extra $36,000 in tax under that formula.
Vancouver realtor Tom Everett said the additional cost will cripple a market that had been recovering.
"They have absolutely lost their minds if they expect people to pay that sort of a tax. I don't understand why on earth the government would do that to the housing economy, seeing as housing is one of the staples of a healthy economy, as you can attest to by checking out what's happening in the U.S.," Everett said.
The provincial government insists the majority of new homeowners won't see a difference in prices when they buy a home under $400,000, because of another PST rebate program for builders. But critics note there is nothing to ensure those rebates are passed on to consumers.
No consultation: NDP
Meanwhile, the B.C. New Democrats have accused the Liberal government of bringing in the new tax without consulting with affected groups such as the tourism and restaurant industries.
Campbell and his party even dismissed the idea of a harmonized sales tax during the recent provincial election, according to NDP finance critic Bruce Ralston.
"This sudden reversal caught consumers and many small businesses by surprise. During the campaign, the B.C. Liberals said they were opposed to the HST," Ralston said in a statement released Friday morning.
The NDP estimated the new tax could cost the average restaurant $50,000 a year in lost sales.
A number of items will still be exempt from the PST portion of the new tax: gasoline and diesel fuel for vehicles, books, children’s clothing and footwear, children’s car seats and car booster seats, diapers and feminine hygiene products.