The provincial Ontario budget is usually a sleepy affair, except in the odd years when new taxes are introduced. 2009 appears to be one such year. Major newspapers are reporting that Ontario is planning to harmonize the province’s 8 percent sales tax with the Federal GST. Ontarians can expect to pay extra taxes under harmonization for:

  • New homes over $500,000 (partial HST rebate applicable on new homes between $400K and $500K).
  • Mutual fund management fees
  • Natural gas
  • Heating oil
  • Hydro
  • Books
  • Children’s clothes and shoes
  • Meals under $4
  • Diapers & feminine hygiene products
  • Accountant fees, lawyer fees, consulting fees etc.
  • Updated from The Ottawa Citizen:

  • Television, phone and Internet services
  • Auto, life and health insurance premiums
  • Footwear selling for $30 or less
  • Taxi, train and airplane fares
  • Services such as hair cuts, gym memberships, drycleaning

Feel free to add to the list in the comments. Canadians in other provinces will be affected by this move as well because mutual funds will now pay extra taxes on their MER. If a mutual fund charges a MER of 2 percent, harmonization will add 0.15 percent in extra taxes. I’m not sure if mutual funds passed along the 2% cut in the GST to clients but you can be sure that they will pass on this extra tax to investors.

[Update: The original post listed “Used cars purchased privately” but as Al points out in the comments private car sales attract the PST; not the GST.]

This article has 19 comments

  1. Not sure why you have question marks after some of them but used cars bought privately (not from a dealer) in Ontario are currently exempt from provincial sales tax. This will be a significant change.

  2. Canadian Capitalist

    Mike: I forgot to edit my entry before posting. I’ll fix it.

  3. so how will this affect first time home buyers?

  4. Canadian Capitalist

    Tom: Good question. The tax rebate for first-time home buyers is called a GST/HST new housing rebate. I haven’t read this document in full yet, but it appears that you get a partial rebate on the GST/HST.

    http://www.cra-arc.gc.ca/E/pub/gp/rc4028/rc4028-e.html

  5. When I do consulting work, I have to charge GST. Now I have to charge much more. I used to just advertise a rate that included GST and essentially paid the GST myself. I’ll have to think twice about this now.

  6. In New Brunswick books are charged a lower rate than almost anything else, and we use the HST.

  7. Accounting fees

  8. Wait, do we pay gst/hst on ETFs’ MER in Canada?

  9. I think that private car sales are exempt from the GST rather than the PST as stated by Four Pillars. I guess that’s good news for car dealers as there will be no financial difference for a buyer now.

  10. Canadian Capitalist

    EconStudent: Yes, GST is paid on ETF MERs too. And yes, that will likely go up as well.

    Al: I think you’re right. Would it mean that there will be no tax on used cars purchased privately now? I think so.

  11. Some more info came out a little while ago:

    $1000 cash to families with income below $160k
    no 8% GST added to children’s clothing and shoes, books, feminine hygiene products, child car seats, diapers and new homes under $400,000.

  12. Ray, you mean “no 8% PST added” – correct?

  13. The management fees charged to mutual funds includes GST and its reflected in the MER. When the GST was reduced, this would have been reflected in the MER. As a result of the GST decrease, the net return to investors in mutual funds would have gone up. If the HST is charged to the fund, the overall MER will increase 8%. I calculate that over 25 years it would cost an investor $15,000 in returns (in an RRSP).

  14. contractors and thus home renovations.

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  16. I don’t understand the math behind that little bonus we’re getting for the “transitional period”. Families of two or more people get $1000, but single people only get $300.

    So two married people with no kids get $400 more than two individuals. How does that compensate for the amount of additional tax we’re going to be paying? Married people somehow have to pay for tax per person than single people?

    Worse yet, they get the same amount of money as a family with four kids. Sure, a lot of children’s items won’t have the additional tax, but is a childless couple really going to spend as much on additional taxes as a large family. I don’t think so.

    Please tell me: Is there something I’m missing?

  17. Ooops. I meant to sarcastically ask if married people had to pay more tax than single people.

    Consider: I’m single, so I get the $300. My married friends get a combined $1000, which works out to $500 per person.

    I’m all for single parents and families getting a bigger break, but dual income, no kid families already have a significant financial advantage over the rest of us (two incomes per household as opposed to one!)

    Anyhow, here’s how the numbers play out:

    http://www.fin.gov.on.ca/english/budget/ontariobudgets/2009/chpt3.html#table2

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  19. What about home insurance?
    I see auto insurance, I assume home as well…