HST Tax Harmonization and Real Estate

Ontario Premier McGuinty has publicly indicated that the provincial government may consider combining the federal Goods and Services Tax (HST) with the Provincial Sales Tax (PST) into one harmonized sales tax. The Ontario Real Estate Association (OREA) has indicated its opposition to this proposal and is continuing to monitor this issue.

OREA sent a letter to the Premier, raising a number of concerns with potential harmonization of the HST with the PST. 

These concerns addressed: 

A harmonized sales tax could increase the cost of newly constructed housing by adding the cost of PST on top of the HST.

A harmonized sales tax could result in PST being charged on various real estate related services that are currently exempt from PST, such as 

• REALTOR® commissions, 
• legal fees, 
• appraisals, 
• home inspections 
• and other services

Given the recent rash of Mayor Miller taxation policies, Toronto homeowners are in no mood for any additional forms of taxation from any level of government.

Click here for a full list of items that will be effected by the HST 

The Ontario Real Estate Association (OREA) says the provincial government’s plan to harmonize the HST and PST will add over $2,000 to the cost of a real estate transaction, hurting the resale home market and prolonging the housing industry’s recovery from the current economic downturn.

“Now is not the time to be erecting barriers to home ownership,” says Pauline Aunger, president of OREA. “We need consumers to invest in housing to help get our economy going again.”

Under a harmonized sales tax (HST), home buyers and sellers will have to pay extra tax on a range of services associated with real estate transactions such as legal fees, moving costs, real estate commissions and home inspection fees. Currently, consumers only pay the five per cent Goods and Services Tax (HST) on these services.

“These additional taxes could price some home buyers, especially first-time home buyers, right out of the market,” says Aunger. “Harmonizing will not help home buyers in any way.”

For a resale house priced at $360,000, a HST could add over $2,000 in new taxes to closing costs. In total, a HST will add $313 million annually in new taxes to resale home transactions.

“In the last decade, Ontario’s homeowners have faced a barrage of new costs,” says Aunger. “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.”

Source: REM Online – posted: 5/7/2009