Ontario’s New Harmonized Sales Tax To Impact Real Estate
As we’ve talked about here before, the real estate industry is a major driver in the Canadian economy. For example, in 2008, real estate in Ontario accounted for $56.6 billion in sales, $6.01 billion in ancillary economic spending and $1.35 billion in land transfer tax revenue to the provincial government. In addition, real estate employs 110,000 Ontarians directly and indirectly.
With yesterdays budget, the Ontario government announced the anticipated new HST blending of PST and GST effective July 1st, 2010 creating a new combined tax rate of 13% on the purchase of almost all goods and services in Ontario. I’m not sure it will really be a harmonious transition.
Currently, certain services associated with a real estate transaction only attract GST and not PST. What that means is that consumers will be forced to pay 8% more for things like legal fees, home inspection fees, mortgage insurance premiums, moving costs and yes, real estate commissions.
According to a media release issued yesterday by the Ontario Real Estate Association, the HST could add over $2,000 in new taxes to closing costs. They also say that overall, it will add $313 million annually in new taxes to resale home transactions. Here is a chart showing the breakdown of those number:
Pauline Aunger, President of the Ontario Real Estate Association said, “In the last decade, Ontario’s homeowners have faced a barrage of new cost. From municipal land transfer taxes to sky rocketing property taxes, homeowners are being pushed to the brink to accommodate increasing demands from government. A harmonized sales tax is yet another cash grab on Ontario’s already overtaxed homeowners.”
One exemption is that the full HST will not apply to new home purchases with a value of under $400,000. Those sales will still attract the existing GST.
It’s worth noting that Quebec, New Brunswick, Nova Scotia and Newfoundland and Labrador have already harmonized their sales taxes with the GST.
Sigh. Will there be consumer backlash in Ontario? Time will tell.