Imagine waking up one morning to find that all of the goods and services you needed to buy cost 8% more than they did the day before. That day may come soon.
In January 2009, Premier McGuinty said that the Ontario government would "take a long, hard look" at harmonizing the 8% Provincial Sales Tax with the 5% federal GST.
Those comments were made in response to a report by the Ontario Chamber of Commerce stating that implementing an HST and abolishing the loophole-filled retail sales tax system would boost Ontario’s global competitiveness and reduce financial and paperwork burdens on Ontario businesses. It would also increase tax revenues, which would surely come as a relief to the finance minister who warns us this month about an $18-billion deficit for this year and next.
Both the Globe and Mail and the Toronto Star have written editorials this week in favour of Ontario adopting an HST, but not everyone thinks it’s a good idea. Toronto real estate lawyer and columnist Bob Aaron suggests that the already-battered real estate market will be further impacted by HST on legal fees and realtors’ commissions and that it will become harder for honest contractors to compete with the growing underground economy.
There is no question that a boost to our businesses and our global competitiveness would be a positive and welcome development, but let’s not kid ourselves — the cost of that benefit will be dearly paid by consumers at a time when most people are already struggling. In addition to paying more for their own daily necessities and services for their own families, consumers will be shouldering the higher costs for goods and services sold to their condo corporations.
An HST will have a significant impact on condo budgets. Landscaping, renovation, accounting and legal services that are presently subject only to 5% GST will become subject to 13% HST. Even if prices were to remain the same or decrease very slightly, the overall out-of-pocket cost for such goods and services will actually increase with the introduction of an HST.
If your condo corporation is barely squeaking out balanced budgets today, it may be time to take a long, hard look at further reducing expenses wherever possible and implementing a gradual increase in common expense fees to help build an operating reserve. Having a cushion in place to absorb higher costs is essential to avoiding scenarios where special assessment is the only remaining option. A gradual increase in common expenses is a far preferable and affordable option than sudden, large lump sum assessments.