Harmonized Sales Tax Impact on Public
On July 23, 2009, Premier Gordon Campbell and Finance Minister Colin Hansen announced that, effective July 1, 2010, BC will adopt a Harmonized Sales Tax (HST), combining the seven per cent Provincial Sales Tax (PST) with the five per cent federal Goods and Services Tax (GST) for a single sales tax rate of 12 per cent. An additional seven per cent tax will be charged on a variety of real estate related services, including commissions, appraisals and other services that are currently exempt, as well as adding thousands of dollars in additional costs to new home purchases.
Looking to offset the increase in costs, the Government of BC plans to offer a partial rebate of the provincial portion of the HST for new housing to ensure that new homes up to $400,000 will bear no more tax than under the current PST system, while homes above $400,000 will receive a flat rebate of about $20,000.
What does this mean for public?
As proposed, the HST will increase the cost of buying or selling a home and becomes essentially an additional tax on home ownership. Under the HST, REALTOR® commissions will be subject to a 12 per cent tax, replacing the five per cent GST now charged.
New home sales over $400,000 will be dramatically impacted, as buyers will now have to pay an additional seven per cent tax (even with the $20,000 flat rebate). This will act as a disincentive to buyers of new homes in the short term.
Although no consultation occurred before the announcement, the BC Real Estate Association (BCREA) is working on recommendations to keep the impact of the HST as neutral as possible with respect to housing attainability. BCREA President John Tillie is prepared an opinion editorial for publication in the Vancouver Sun on Wednesday, July 29.
More information will be available once the BCREA Board of Directors, staff and member boards have had a chance to review and analyze potential strategies.
If you would like more details on how the HST could affect your real estate transactions, please feel free to call or email me.
(information taken from BCREA article Copyright © British Columbia Real Estate Association)