It has often been said that history repeats itself, and we all know this to be true. But the McGuinty government should hope that their upcoming plans to implement the Harmonized Sales Tax does not follow what happened with the GST and the Mulroney government in 1990 and 1991.
The Mulroney government knew that tax reform was needed to fix a problem with the manufacturers tax which disadvantaged Canadian manufacturing exporters. Their solution was the GST. With hindsight, I think most government people would agree the concept was good. But truly, it could not have come at a worst time. Canada was burrowed in a recession that lasted for several years. The addition consumer tax only made things worse. Adding consumer taxes at a time when you want to encourage spending is not a good idea.
Canadians reacted poorly to the new tax, and in the next federal election in 1993, Jean Chretien and the Liberals were elected to a majority and the Progressive Conservative Party went from a majority government to a party holding two seats nationally.
Here we are, fifteen years later, struggling through another recession and the provincial Liberals are about to increase consumer taxes by implementing the HST. Could this come at a worse possible time?
I fully understand the pressure on the government to keep their deficits manageable. Their revenues are down and expenses are up, but this is clearly not the time for this solution. We need to let them know that this plan is not acceptable at this time.
The housing industry has taken some major hits over the past year. With rising unemployment and consumer confidence down, many have chosen to defer a new home purchase. The Ontario Real Estate Association estimates that the new Harmonized Sales Tax will add an average of $ 2,000 to a home purchase. Where the services required were paying 5% GST, they will now be paying 13% HST for these services. The service fees of mortgage insurance premiums, legal costs, real estate commissions, and home inspectors, will all be subject to the higher tax rate. These additional taxes could price some buyers right out of the market at a time when we need to be helping these buyers, not slowing them down.
There are many other businesses and suppliers who will now be required to charge the double tax for their services. Accountants, architects, engineers, graphic designers and commercial artists will cost the consumer 8% more. Another area where harmonization will have a particularly negative effect is nursing home operators, whose clients will have to pay more and might not be able to afford it.
There have been rumours for some time that this day would come. The Maritimes and Quebec have changed over some time ago. Why would the provincial Liberals choose such an inopportune time to roll out this cash grab?
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