PAGE A4 – July 2009 – The GTA Construction Report
Home builders relieved, renovators dismayed by new HST rules
MARK BUCKSHON – The GTA Construction Report Editor
houses and dense develop- plementary changes feder- moving to a progressive However, most renova-
ments, and more expensive ally, the GST on that same GST tax structure in Ontario tors are left out in the cold
Ontario home builders nesses will be able to claim
houses won’t be built.” house would be an addi- if not increase the GST re- by the new changes.
are breathing a sigh of relief input tax credits, meaning
Thankfully, the artifical tional $25,000. bate thresholds from “This is just a provincial
after the provincial govern- they won’t feel much pain
market distortion has been “We said from the outset $550,000 to $700,000, based tax grab when we don’t need
ment announced changes to from the tax (and may actu-
removed by the new rules that we were not opposed to on the Consumer Price more taxes,” a contractor in
Harmonized Sales Tax ally save money, as they will
which allow the full exemp- harmonization; in fact we Index (CPI) increase since Kitchener said. “If the rate
(HST) thresholds to reduce effectively be exempt from
tion for the first $400,000 believe it is the right long- the GST was introduced in was reduced to say 10 per
the burden on homes over the former Provincial Sales
value of every home, no term approach for the 1991. “The next step is to cent or some revenue neutral
$400,000, but renovation Tax on most purchases), but
matter how expensive the Province, however, we also challenge the federal gov- rate, then it makes sense.
contractors are deeply con- consumers will encounter
final home is. made the point that housing ernment to improve the cur- “It makes sense adminis-
cerned about the impact the the full tax bill.
The new rules set a re- is different, a fact the rent GST structure as it tratively since HST is easier
new tax structure will have New home construction
bate of $24,000 for homes Province acknowledge don relates to both new homes for all businesses remitting
on their business and the on- and “substantial renova-
worth $500,000 or more. budget day and has under- and professional renova- both GST and PST. But for
going battle against the un- tions” had always received
While homeowners will scored with these amend- tions.” plumbers, electricians and
derground economy. special consideration under
have to pay the full tax on ments to the tax structure,” Other changes in the reg- businesses providing serv-
“This is going to cripple the former GST.
the portion of the property said BILD Chair Leith ulations include guidelines ices to property owners who
the renovation industry in Under the originally pro-
greater than $500,000, the Moore. that the provicnial rebate for are only now charging and
Ontario and the underground posed rules, homeowners
tax burdens are substantially “The provincial govern- new housing would be pro- remitting GST, (the) HST
operators will become cash would be rebated all but 2
reduced. ment’s adjustment to the tax vided for the same types of will only create angry cus-
rich,” said Mike Martin, per cent of the PST compo-
The provincial govern- treatment of new homes property for which the GST tomers not wanting to pay
chair of the Ontario Home nent of the harmonized GST
ment’s decision to move to a means that families can con- new housing rebate is avail- more tax.
Builders’ Association – that 2 per cent represented
progressive tax structure, tinue to pursue the dream of able including substantially “Customers who have re-
(OHBA) Renovation Coun- the embedded Provincial
under which the full HST home ownership while the renovated housing, co-oper- stricted budgets will cut
cil. Sales Tax cost within the
will be charged on the industry can continue to the ative housing, owner-built back on the amount of work
“This will send another home purchase price. How-
amount of the purchase price economic growth of this housing, hosuing on leased being done resulting in re-
25 per cent of renovators in ever, homes valued at
over $400,000 instead of on Province,” Moore said. land, mobile homes and duced economic activity
Ontario underground, mean- $500,000 or more would
the entire purchase price is Moore called on the fed- modular homes for use as when we need more not
ing the consumer will now have to pay the full tax.
enlightened, responsive and eral government to follow primary places of resi- less.”
have a 75 per cent chance of (Homes between $400,000
consistent with its initial the Province’s leadership in dence.”
getting ripped off by the un- and $500,000 would be
budget focus on protecting
derground operators. No taxed on a graded scale.)
new home buyers,” said
contract with cash, good This proposed tax caused
Stephen Dupuis, President Most readers unhappy with new HST provisions
luck general public. extreme anxiety within the
and CEO of the Building In-
“Not very smart business home building community,
dustry and Land Develop- A slight majority (51 per cent) of On- reduced rate, it would ahve been rev-
by the government, they will especially in markets like
ment Association (BILD). tario Construction Report readers who re- enue neutral and fair!”
lose billions.” Toronto where most homes
“The move to a progres- sponded to a quick online survey about the Renovators, not surprisingly, are
However, new home sell for more than $400,000.
sive tax structure is clearly Harmonized Sales Tax (HST) say it will deeply unhappy with the new tax. Bat-
builders are much happier Builders attending a spe-
intended to benefit new
cause “major harm” to their businesses, tling the underground economy, they
with the tax changes an- cial session to learn about
home buyers as the ultimate
while only six per cent say the new tax will now must charge their clients an addi-
nounced with the transition the tax in Ottawa before the
taxpayers. The progressive
be a “major benefit”. tional eight per cent – encouraging op-
provisions to set out the government clarified the
tax structure dramatically re-
The survey, of course is unscientific – erators who don’t pay any taxes to
rules of the game between rules, expressed grave anxi-
duces the quantum of the tax
the response of about 50 readers, coupled totally undercut them.
now and the HST implemen- ety about the potential dis-
increase.”
with its self-selecting nature – could dis- • “It’s bad enough now for the renovator
tation on July 1, 2010. tortions in the marketplace.
For example, for a
guise the fact that many contractors, espe- to have to eat an eight per cent PST
Then, the provincial 8 “Everyone will be struggling
$500,000 home the PST, net
cially in the non-residential community, cost in product purchase for renova-
per cent sales tax will be to build under $400,000,”
of input tax credit, will de-
will have no problem with the tax. tions to customers....that now this will
combined with the 5 per cent said one builder. “There’ll
cline from $30,000 to
In fact, one commercially-focused be even more complicated to handle
GST. Like the GST, busi- be a lot of stacked town-
$6,000. Pending any com-
builder, part of the six per cent surveyed passing this cost on to consumers,” one
who like the new tax, said: renovator said. “I do believe this will
Thank you to all proud supporters of the Gilda's
• “I like it a lot, less risk and red tape. slow down the market considerably.
Only negative is the government Maybe it’s time to think of getting out
Club Barrie Ontario clubhouse construction
should have reduced the overall tax of this trade and do something
project! Watch this space for exciting news!
from 13 per cent to 10 per cent such else.....this will mean job losts in the
that is has a broader tax base but at a industry.”
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