Ontario’s Budget 2009 dealt the real estate market a significant blow with the announcement of the harmonization of the Provincial Sales Tax (PST) with the federal Goods and Services Tax (GST).

The Provincial government will, starting July 10, 2010, convert the PST (8%) to a value-added tax structure and combine it with the GST (5%) to create a single federally administered harmonized sales tax. The single sales tax would have a combined tax rate of 13 per cent.

Under the government’s proposal, new homes under $400,000 will be exempt from paying the HST.New homes priced between $400,000 and $500,000 will receive a reduced rebate based on a sliding scale (details are yet to be finalized). Homes over $500,000 will be taxed at a harmonized rate of 13%.

The price of resale homes will continue to be exempt from sales taxation under the proposed HST. However, for the first time, services associated with resale closing costs will be subject to both sales taxes, under the proposed sales tax harmonization, legal fees, real estate commissions and home inspection fees will get taxed at a harmonized rate of 13 per cent. Currently, these services pay only the GST at a rate of 5%. OREA estimates that these new taxes on services related to resale transactions could add over $2,000 to a resale home transaction.

In response to the Government of Ontario’s proposal, OREA issued two ‘Call for Action’ notices to all REALTOR® members, asking them to send an email to their MPPs and alert their clients about the detrimental impact of a HST on housing. To date over 11,500 emails and letters have been sent to MPPs at Queen’s Park, the Premier and the Finance Minister.

If you are against the HST Please contact your Local MPP.