Sales Tax Harmonization
OREA's Response
REALTORS® and the HST
Despite a vigorous opposition campaign by CREA, the Ontario government brought in the HST on July 1, 2010. Below is a summary of REALTORS® concerns on the impact of the HST on our industry and our clients.
A harmonized sales tax (HST) has resulted in the 8 per cent Provincial Sales Tax (PST) being levied on a variety of real estate related services, including legal fees, commissions and home inspections which are currently exempt. These new taxes could add over $1,800 in extra closing costs.
A HST has also added thousands of dollars in additional costs to new home purchases.
Q&As on the HST
I’m a REALTOR®. What does this mean to me?
The HST effectively increased the costs of doing business for Ontario’s REALTORS®. Under the current system, REALTORS® must charge 5 per cent GST on the fees they charge to clients. Under a harmonized tax arrangement, REALTORS® would charge their clients for their services at a rate of 13 per cent.
Legislative/Regulatory Outlook/Status
In the 2009 Ontario Budget the government indicated that it plans to harmonize the PST with the federal Goods and Services Tax (GST) beginning July 1, 2010. Pending legislative approval and Ontario and Canada signing a tax coordination agreement, the single sales tax will take effect July 1, 2010 with a combined rate of 13 per cent.
Harmonization was not included in the 2009 provincial budget bill. This means that OREA will have an opportunity to continue our opposition to the HST when the government introduces enabling legislation.
OREA Position
OREA opposes any system of harmonized sales taxation because it will hurt the affordability of housing. New and resale home transactions will face significantly more tax under a HST system.
I’m a Buyer/Seller. What does this mean for me?
On resale transactions buyers and sellers now face an additional tax on lawyers fees, moving costs, REALTOR® commissions, home inspection fees and title insurance.
For a single detached house priced at $302,354, the HST adds $1449 in new taxes to closing costs (see Table 1). In total, the HST will add $263 million annually in new taxes to resale home transactions.
OREA’s active opposition to the HST has been comprehensive including press releases, newspaper advertisements, briefing notes for MPPs and a REALTOR® Call-for-Action that resulted in over thirteen thousand emails being sent to MPPs at Queen’s Park.
Table 1: HST and Average Resale Home in Ontario ($302,354)
| Taxable Service | Former Tax Payable | HST Tax Payable | New Taxes |
|---|---|---|---|
| Legal Costs | $50.00 | $130.00 | $80.00 |
| Sample Real Estate Commission1 | $756.00 | $1,965.00 | $1,209.00 |
| Home Inspection | $20.00 | $52.00 | $32.00 |
| Moving Costs | $50.00 | $130.00 | $80.00 |
| Home Appraisal | $15.00 | $39.00 | $24.00 |
| Mandatory Home Energy Audit | $15.00 | $39.00 | $24.00 |
| Total Estimated New Tax: | $1,449.00 |
1 Based on 5% commission example; note that all commissions are negotiable.
