Harmonized Sales Tax (HST)

There is little doubt it will increase costs to consumers and there are some questions about its benefits.

The argument is that the province needs to find additional sources of revenue. As we proceed further into the new millennium there will be increased demands on government budgets to pay for services that we have come to take for granted, like healthcare and old age pensions.

In the past there were items that were subject to PST (provincial sales tax) only. There were other items that were subject to GST (goods and service tax, a federal tax). There were also items that were subject to both PST and GST. Typically, PST was charged against goods and GST was charged against most services and some goods. Insurance premiums were subject to PST. The impact this had on real estate was that if someone was to purchase a property and require fire insurance, that insurance would be charged PST. It also meant that if the buyer applied for a high ratio mortgage, there would be a high ratio insurance premium and the premium would be subject to provincial sales tax. Real estate commissions and legal fees were subject to GST. New homes would be charged GST but would, in certain instances, be subject to rebate.

Now everything that was charged one or the other or both in the past will be charged both: 8% + 5%= 13% total (in Ontario). Fortunately, where there were rebates before, there will be rebates now.

As far as real estate is concerned, the tax will apply to various aspects of the transaction including real estate commissions, home inspections, legal services, high ratio mortgage insurance premiums, fire insurance premiums, etc.