INDUSTRY INSIDER
Exempting housing from tax harmonization a 'no-brainer'
February 28, 2009
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Stephen Dupuis
I have to admit that I get a thrill when the bloggers comment on my columns, even if they disagree, which they often do. I was pleased when someone using the pseudonym "Smoothy" responded to my Jan. 31 column on sales tax harmonization.
Under the subject-line "No-Brainer," Smoothy wrote, "based on the numbers by Stephen Dupuis, how could Dalton McGuinty even consider tax harmonization at this time, or any other time for that matter? It seems like a no-brainer to me. Maybe he just threw it out there to see what type of criticism would result."
After years of flatly rejecting federal calls for harmonization of the GST and PST because, as he said, "it would only hurt consumers," the premier changed his tune in late January saying, "I just think we need to give a rethink now in a number of areas we have rejected in the past."
Whereupon I wrote that sales tax harmonization would hammer housing hard as the biggest of the big-ticket items. I pointed out that under a harmonized scenario, the gross (literally and figuratively) tax impact would be an additional $17,920 on a $350,000 home or condo, more or less depending upon the house price and assuming no change to the rates or rebates.
More recently, housing economist Frank Clayton, who is executive vice-president of Altus Group Economic Consulting and an adviser to the Canadian Home Builders' Association at the time the GST was originally formulated, wrote that "any harmonization tax scheme must recognize the uniqueness of the new housing sector and protect new housing from the full brunt of any additional tax. Otherwise, a sharp rise in taxes will have serious consequences for the purchasers and builders of new homes and the economy as a whole."
As Clayton wrote, "taxing the full price of new housing fails to recognize that new housing is really an investment good. A new home provides shelter service not only in the year of purchase, but for many years into the future (typically 50 years or more).
"Thinking about applying a full tax rate under a harmonized sales tax to the full price of new homes sold in the province is scary. New home sales would fall, which would be adverse for the provincial economy because of less construction activity," Clayton added.
You can see why I jumped all over this issue a few weeks ago and why BILD will continue to advocate forcefully on behalf of new homebuyers in the GTA. What would be the point of the federal budget stimulus, much of it for construction, or the pending provincial budget, with its promise of further stimulus, if a key strategic sector – new homes and condos, resale housing and renovation – gets whacked by a gargantuan tax increase?
Maybe Smoothy is right; maybe the premier was just floating a trial balloon. If so, I hope the balloon has floated up never to be seen again. Just in case it's more than just a toe in the water, BILD has retained Clayton as our new economic advisor and assigned tax harmonization as the topic of his first report, due out early next month, well in advance of the provincial budget.
If the premier wants to get any traction on harmonization, the only way is to declare a complete and full exemption for housing from the get-go. That's a "no-brainer."
Stephen Dupuis is president and CEO of the Building Industry and Land Development Association. The views expressed are those of the president. Email: president@bildgta.ca.
Read more on this topic:
Harmonized tax with hit renovations, resales
Tax harmonization would hit homebuyers hard
Toronto Star