GST, PST merger would slam door on Ontario homebuyers: study

Ontario's new homebuyers would face a massive multimillion-dollar tax grab under a harmonization of the federal GST and Ontario PST, according to a report released on Wednesday.

The report was prepared for Building Industry and Land Development Association (BILD), a Greater Toronto Area affiliate of the Ontario Home Builders' Association.

Veteran housing analyst Frank Clayton concludes a harmonization of the PST and GST would add a whopping $46,676 to the cost of a new home in Toronto and about half that amount to homes outside the city.

The report said the added cost to a new home in Windsor would be almost $9,000, while in Ottawa, it would be just over $17,000.

BILD chief executive officer Stephen Dupuis says those additional costs, without offsetting government help, would have the effect of "slamming the homeownership door shut in the face" of many Ontarians looking to buy a new home.

The federal Conservatives have long pushed Ontario to merge the two taxes, but the province had repeatedly shot down the idea.

Ontario Premier Dalton McGuinty has not ruled out the idea of a harmonized tax ahead of provincial Finance Minister Dwight Duncan's tabling of the budget on Mar. 26 as a means to make businesses competitive and keep jobs in the province.

"We've heard from a lot of folks in the business community who are in favour of this, and we've heard from others who have some concerns about it," McGuinty told reporters on Wednesday at Queen's Park.

"It's one of the host of options the minister is looking at."

Clayton said the homeowners are upset because new homes are already essentially exempt from the PST, facing only Ontario's sales tax in an indirect manner as an extra levy on building materials.

That translated into a PST-generated increase of 1.6 per cent to 2.5 per cent on the price of a new home, he estimated.

McGuinty's harmonization plan would see the full eight per cent PST applied to the value of a new home, a proposal that would drive the final sales price of a house skywards, Clayton said.

New Brunswick, Nova Scotia and Newfoundland and Labrador have already harmonized their provincial sales taxes with the GST — with financial help from Ottawa.