REALTORS discuss HST & Real Estate in Ontario
From The Kitchener Waterloo Real Estate Board blog:
On Thursday June 17th, 2010, 16 leaders from Waterloo Region’s real estate industry, including REALTOR® members of the Kitchener-Waterloo Real Estate Board (KWREB), Cambridge Real Estate Board, staff, and a representative of the Waterloo Home Builder’s Association met with Ontario PC Leader Tim Hudak at KWREB’s offices to discuss how the HST will impact the real estate industry and to explore ways in which to help moderate its impact.
Concern was expressed all around the table regarding the impending HST. The real estate experts are concerned that the implementation and transition rules are confusing and lack clarity or even consistency. Major points included:
[note: This is an excerpt. Click the above link for the whole article]
- This tax will raise the cost of home ownership and decrease affordability for everyone. REALTORS® want the government to quit taxing homeownership.
- While proponents of the HST argue that costs will eventually decrease as the HST works its way through the manufacturers supply chain, this remains to be seen, and many at the table expressed serious doubt that these savings will be passed on to consumers.
- It was the more affordable homes that drove our local real estate market out of the recessionary doldrums last year, and activity in the higher end homes was pretty quiet until recently. Unfortunately the HST will have the greatest potential impact on the group that was central to our local real estate economy last year.
- Hudak expressed concern that the HST will slow the economy down as consumers have less money to spend. As well he worries the HST could drive black market for construction contractors.
Click here for the whole thing, including four ideas suggested at the meeting
I’ve yet to hear anyone not in politics speak positively of the HST. What benefits of it do you see?
What do you think? Let us know in the comments
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Hi,
I'm not in the real estate biz, but in a small biz.
I worked for a decade in Europe, Italy to be precise, where a VAT was in play at 19% at the time.
A VAT (HST is same, value added tax) is, in general, a good thing for business.
A business has an edge in it's purchases over the consumer with an HST, in that it's tax inputs from purchases are deductible. The net amount of NEW tax on an item is determined by the value added by that business -- in the case of labour, that coudl be huge, in the case of agency, that could be small -- to the final price of the product as it transits to the next level of the economic chain.
It's great for exports, really great. In Italy, at the time, I was there, they even institued a "credit plan" for VAT which allowed an italian company to purchase without paying VAT on it's purchases (being vat exempt) based on it's credits from previos period's export. A huge cash flow saving.
That said it has two major impacts.
1. good for legitimate biz in general.
2. great for black market activity
(Italy had such a large black market that when the EU was formed, they were able to insist that their economic standing was determined by the total of "economic activity" presumed to exist, as compared to the actual GDP the government registered legally)
It was well known that the amount of currency in flux was much greater than the stated economic activity the government could track.
That said.... we, as a small antiques biz, are ramping up our cross-border sales dept to the max, for obvious reasons. Wish it was easier to do business in this country with other countries, Canada is really a "colonial" in that.
but I will note that where the VAT worked the HST fails. VAT was ONE rate cross country... the HST is what..... 5 diff rates? 15% in NS, 14% in NF, 13% in NB, ON, BC, 5% in AB, MN, SK? and who knows what/where. Took me an hour on the phone with the RevCan folks to even get those numbers.... their own staff isn't always sure.
With those diff rates administering the HST for a small biz is now a nightmare.
Cash is now king, and the net effect will be the HST does only damage in this format.
Italy has it's taxation rates for VAT and income tax set high -- it's because they know the net collection result is only 50% of what the actual rate is. The higher it went (from 15% up to 19%) the less it actually generated as a percentage of the real economic activity).
This will happen here. I'm looking for a 15 % HST soon whose net result is 11% real taxation.
A shameful result that will be caused by a stupid implementation.
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