Real Estate: My New Job as a Tax Collector

istock_000003021007xsmallIn yesterday’s Ontario Budget, the Liberal Government, in a effort to help the business community has heaped more taxes on Homeowners. After last year’s City of Toronto Land Transfer Tax(doubling the existing Tax but only in the 416 Region), there will now be further new taxes when you buy and sell homes.

Previously, services such as Lawyer’s fees, Home Inspection and Realtor’s Commission were only subject to the Federal GST but now the Province in “Harmonizing” taxes has decided that these fees should also be subject to the Provincial 8% as well making the new HST, as it is called, 13% by the beginning of 2010. The Province may call it Harmonizing but it looks more like another tax increase to me, especially when by adding taxes to services that were never taxed before and lessening the administration of these taxes, there is no counter balance being offered in dropping the new HST to a lower than 13% rate.

It is the REALTOR that has to remit the GST and it is the REALTOR that will now have to remit the HST.  At present, my assistant works hours each week dealing with my GST as there are rebates available for all the goods and services that I already pay GST on. We will deal with this as we will also have to deal with the Provinces new plan to make Energy Audits part of the Agreement of Purchase and Sale but I have some problems with the Government’s handling of all this in a DEMOCRACY:

1) Have there been assessments of the impact of Businesses that are newly subject to the HST? If so, where is the transparency to release these studies to the consumer…

2) If the Ontario Government is giving household’s making under $160,000 a year a first year series of cheques amounting to $1,000 per household, then is the assumption that these new taxes will amount to increases of $1,000 per year? If that is the case, what happens in the second year and is that $1,000 taxable?

3) What happens to residents in the core of the City where the average sale price means that very few properties would be exempt under the $400,000 exemption? These are the same tax payers who are still smarting from the Miller Land Transfer Tax that was permitted by the Provincial Government and has had a further chilling effect on the Real Estate Market in the City of Toronto. New Homes over the exemption price will now be liable for a %13 tax and increase of 8% over the existing 5%. That should really dampen the building of new larger condominiums and homes….buying new construction of $1,000,000 will mean a tax of $130,000 before the Land Transfer Tax and other any other services…

4) Why was this new stealth tax brought forward so quickly in Ontario and without public consultation? What has been learned from the experience of other Provinces who have move to an HST?

5) Does the Province not know that the sale of a house usually puts at least $33,000 into the economy in terms of renovations, painting, purchase of appliances? Is the timing right for this kind of hit?

If I appear somewhat shell-shocked it is because with everything I read about the Harmonized Sales Tax, I find more and more to question and wonder where the Public discussion has been. I am a big believer in transparency and discourse in any major change that Government proposes and wonder why there seems to have been so little of it in the case of the HST…

Please feel free to add your thoughts and get the discussion going below and check out the article in Today’s Globe and Mail, the press release from BILD (the Toronto Home Builder’s Association) and the press release from the Ontario Real Estate Association.

Related Posts:

The Reality Behind the Proposed Provincial Harmonized GST and PST Tax

The New Provincial Harmonized PST/GST and the Building Industry.

7 Responses

  1. ken mclachlan

    Richard, well written poste. I find it interesting that the HST, which could have a major impact on our industry, did not receive the attention it deserved (to this point.) Is it that we are all numbed by everything that we have lost the reflex to fight?

  2. Richard Silver Post author

    I think that the “S” in the HST stands for STEALTH as the whole tax has been thrown upon the taxpayer without proper consultation. When you have to put it in dollars and cents terms, people are shocked by the huge change it will be. Let’s keep getting the message out!!

  3. Tom Lebour

    TREB’s Government Relations Committee in concert with OREA’s Political Action Committee will continue to lobby against HST.

    There will be a renewed Call For Action posted on TMLS/Stratus next week to mobilize our members.

    The fight is far from over !

  4. Richard Silver Post author

    If the Government has chosen not to do impact studies then I guess it will be up to the affected organizations to do so…too bad.

  5. Margery Snider

    We have a potential serious issue with the HST on new homes over $400K. Last March we signed an agreement to purchase (for $579K) a condo to be built in Stouffville. Construction hasn’t started yet, so it likely won’t close before the July 1, 2010 effective date for the HST. We have not seen any suggestion in the related announcements to date that agreements entered into prior to the budget announcement will be exempted, and are very concerned that we may be looking at a $35K hit. It seems very unfair to us that the government could arbitrarily increase our purchase price so significantly on a contract we can’t get out of, and might not have entered into at this price. We have sent a letter to the Minister of Finance, and have e-mailed all the Toronto areas MPPs and the Premier, the various builders’ and real estate associations, the Bar and Accountants’ associations, and the Canadian Federation of Taxpayers. We are trying to be proactive in ensuring that actions are taken to get a commitment from the government that pre-existing deals will be exempted. We are trying to reach as many stakeholder groups as quickly as possible to engage them on this issue. Does anyone has any ideas for further actions we could take? I would love to try to find and mobilize other people who will be in the same boat as us, but would probably need the cooperation of the builders to do this. Not sure how best to go about it.

  6. Richard Silver Post author

    Thanks for your thoughts. The most chilling comment you make Margery is “and might not have entered into the Purchase at this price”. You are probably like a lot of buyers of new Construction who may start to have second thoughts about buying. Good Luck to you and keep us in the loop!

  7. Wilf Mandel

    What amazes me is the fact that Dalton floated the baloon about this tax well over a month ago.
    There was little, if any public reaction.
    The press gave him a pass.
    I’m guessing his conclusion was that silence = consent.
    There was no real public reaction until just a couple of days before the budget.
    People obviously didn’t take time to think that as well as the Realty impact, there will be 8% more tax on gasoline, home heating, hydro and more.
    At least Quebec had the decency to reduce PST when they harmonized, but not Dalton.

    All of this in a recession.
    I can hardly wait to hear how whichever government crows about eliminating the deficit but not mentioning the cash cow of this increased tax (John Martin’s claim to fame thanks to the GST cash cow).

    All I can say is that I prefer at least to be kissed first…

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