Consumers would bear brunt of HST

Enlarge Image

Retailers would gain

Enlarge Image

The provincial government would be out millions.

If a harmonized sales tax was introduced in Manitoba, it would cost the average family an extra $161 a year for gasoline, $63 more for entertainment and $30 more for personal services such as haircuts.

A two-earner family of four with an income of $60,000 would have to shell out an extra $164 (net, after tax credits) under the HST, while a single person earning $85,000 would pay $340 more in sales tax.

Meanwhile, those buying a brand-new $250,000 house would face a whopping new tax burden of $17,000, the provincial government said in a report on Tuesday, although that figure could fall to $8,750 if builders passed on all their input tax savings.

The Selinger government has made it clear that it will not be joining provinces such as Ontario and British Columbia in adopting the HST any time soon.

Until Tuesday, it had not released detailed reasons for that decision, except to say that harmonizing Manitoba's seven per cent sales tax with the five per cent federal GST would cost consumers an additional $400 million a year. That would happen because many goods and services on which consumers don't pay provincial sales tax -- such as fuel, books, haircuts, real estate agency fees, taxis and parking -- would be taxed at the 12 per cent HST rate.

The Winnipeg Chamber of Commerce has been one of the HST's biggest advocates, saying it is needed to keep businesses competitive with other jurisdictions. It also recommends a number of offsetting exemptions, tax credits and tax reductions to soften the blow for consumers.

The government report pegged the tax savings to business at $510 million a year, but said not all companies would benefit equally and some, such as financial services firms, would actually be worse off under an HST.

The report said that adopting tax-neutral rebates and point-of-sale exemptions similar to what is being done in Ontario and British Columbia would cost the provincial government $190 million.

A low-income credit that would completely offset the impact of the HST for low-income households would cost the Manitoba treasury an extra $57 million. Meanwhile, the administrative savings to Manitoba from the federally administered HST would amount to only $12 million a year.

Ottawa has offered a one-time payment of $344 million to help the province adjust to the new tax, but the provincial government has called that woefully inadequate.

Finance Minister Rosann Wowchuk reiterated the government's opposition to the HST with the release of the report Tuesday.

"For us right now, this is not the step to take because we think it would be a very heavy burden, and it would in fact cost the province more money than would be gained from it," she said.

She got no quarrel from the Progressive Conservative Party, which also opposes the HST.

"We're never going to increase taxes on Manitoba consumers. And as long as harmonization means a tax increase, it's never going to happen under (a Conservative) government," Opposition Leader Hugh McFadyen said.

larry.kusch@freepress.mb.ca

Winners and losers

THOSE who would gain under the HST:

Construction companies ($267 million), manufacturing ($69 million), retailers and wholesalers ($64 million) and farmers ($18 million).

Overall, the net benefit to business would be $510 million a year in Manitoba.

Those who would lose under the HST:

Consumers would bear the brunt, with a total annual tax increase of $405 million.

The provincial government would be out hundreds of millions of dollars annually if it cushioned the blow for low-income Manitobans and exempted certain goods and services from the new tax.

Some businesses -- such as residential landlords, daycares, private personal-care homes, financial services firms and most non-institutional health and dental service providers -- would be worse off under tax harmonization because they provide exempt services and are not eligible to claim input tax credits. They would pay more sales tax due to an expanded base of taxable items.

-- Source: Manitoba Finance

Republished from the Winnipeg Free Press print edition December 16, 2009 A5