If approved, effective July 1st, 2010, the Province of Ontario will combine the 8% Ontario sales tax and the 5% GST into a single 13% value-added sales tax (HST) that would be federally administered by the Canada Revenue Agency (CRA).
As part of the proposed sales tax reform, cash payments would be provided to Ontario tax filers, in each of June and December 2010, and June 2011.
ADDITIONAL POINT-OF-SALE REBATES (EXEMPTIONS)
In addition to the point-of-sale rebates of the provincial component of the HST proposed in the 2009 Budget, the government intends to provide further targeted sales tax relief for consumers. Additional point-of-sale rebates from the eight per cent provincial component of the HST are proposed for the following:
- Print newspapers that contain news, editorials, feature stories or other information of interest to the general public, and that are published at regular intervals, typically on a daily, weekly or monthly basis, but not flyers, inserts, magazines, periodicals and shoppers.
- Qualifying prepared food and beverages that are ready for immediate consumption and are sold for a total price (for all qualifying items purchased, excluding HST), of not more than $4.00. Qualifying items would include:
- food or beverages heated for consumption;
- sandwiches and similar products;
- platters of cheese, cold cuts, fruit or vegetables and other arrangements of prepared food;
- cakes, muffins, pies, pastries, tarts, cookies, doughnuts, brownies, croissants with sweetened filling or coating, or similar products where they are not prepackaged for sale to consumers and are sold as single servings in quantities of less than six;
- ice cream, ice milk, sherbet, frozen yoghurt or frozen pudding, non-dairy substitutes for any of the foregoing, or any product that contains any of the foregoing, when hand-scooped or machine dispensed and sold in single servings;
- other food items that are excluded from zero-rated GST/HST treatment as basic groceries solely by virtue of the types of sales made at the establishment where they are sold, such as the sale of a bagel or a plain croissant in a restaurant;
- non-carbonated beverages, when dispensed at the place they are sold; or
- when sold with a qualifying food item listed above: other beverages except if the cans, bottles or other primary containers in which they are sold contain a quantity exceeding a single serving; cakes, muffins, pies, pastries, tarts, cookies, doughnuts, brownies, croissants with sweetened filling or coating, or similar products where they are pre-packaged for sale to consumers in quantities of less than six items each of which is a single serving; ice cream, ice milk, sherbet, frozen yoghurt or frozen pudding, non-dairy substitutes for any of the foregoing, or any product that contains any of the foregoing, when packaged and sold in single servings; or other snack foods, such as chips, salted nuts, popcorn, candies, fruit bars, granola bars, etc.
- Wine, spirits, beer, malt liquor or other alcoholic beverages would not be a qualifying beverage for the purpose of the point-of-sale rebate of the Ontario component of the HST.
DETAILS ON POINT-OF-SALE REBATES (EXEMPTIONS)
The 2009 Budget proposed to provide targeted relief for consumers on the provincial component of the HST on many items important to Ontario families by providing point-of-sale rebates for books, children’s clothing, children’s footwear, children’s car seats and car booster seats, diapers and feminine hygiene products.
The following information provides additional details for consumers and retailers:
- Books, including:
- a printed book or an update of a printed book,
- an audio book (i.e., all or substantially all of which is a spoken reading of a printed book),
- a bound or unbound printed version of a scripture of any religion,
- a printed book and a read-only medium (e.g., CD-ROM) whose content is related and integrated with the book’s content and when sold together as a single package,
- a printed book and a read-only medium and/or a right to access a website when sold together as a single package, and if specifically designed for students enrolled in a qualifying course, such as educational courses of elementary or secondary schools.
- Children’s clothing designed for babies,, girls and boys up to and including girls’ Canada Standard Size 16 and boys’ Canada Standard Size 20, or clothing designated for girls and boys in sizes small, medium or large if the clothing does not have a designated Canada Standard Size. Children’s clothing eligible for the exemption would not include costumes or clothing like sports protective equipment. These are the rules that exist for current PST exemption, and are similar to other provinces with these exemptions.
- Children’s footwear designed for babies and girls and boys up to and including girls’ size 6 and boys’ size 6, including footwear without a numerical size that is designated for girls or boys in size small, medium or large. Children’s footwear eligible for the exemption would not include skates, rollerblades, ski-boots, footwear that has cleats, or similar footwear. These are similar to conditions that exist in other provinces that have a similar exemption.
- Children’s car seats and car booster seats that are restraint systems or booster cushions that conform with Transport Canada’s safety requirements for Standards 213, 213.1, 213.2 and 213.5, as described under the federal Motor Vehicle Safety Act.
- Diapers, including cloth and disposable diapers designed for babies and children, and diaper inserts and liners, rubber pants and training pants. Incontinence products would be zero-rated under HST, in accordance with current GST rules.
- Feminine hygiene products, including sanitary napkins, tampons, sanitary belts or other products marked exclusively for purposes similar to the purposes for which sanitary napkins, tampons and sanitary belts are marketed.
ELIMINATING HIDDEN TAX
Replacing the provincial sales tax would help eliminate the hidden sales tax that many products carry. Currently the PST is charged on various business costs throughout the production of an item. This hidden tax is ultimately added into the cost the consumer pays at the cash register.
Under the proposed HST, most taxes paid on business inputs would be refunded to the business — savings that can be passed on to consumers in the form of lower prices.
How it is intended to impact businesses in Ontario:
Benefits for Business
Increased Competitiveness = Greater Investment, More Jobs
- The HST and cuts to business taxes will cut Ontario’s marginal effective tax rate on new investment in half.
- Ontario will join more than 140 countries and four other provinces that already have a value-added sales tax like the HST – because it is modern, efficient and necessary to compete in today’s changing world.
- Report: Changes Mean More Jobs For Ontario
Cuts to Business Taxes
Ontario will be providing $4.5 billion in tax relief over three years, including Corporate Income Tax (CIT) cuts starting July 1, 2010:
- The CIT rate will be lowered from 14% to 12% then further reduced to 10% over the next three years
- The CIT rate for manufacturing and processing will be lowered from 12% to 10%
- The small business CIT rate will be cut from 5.5% to 4.5%
- The small business deduction surtax will be eliminated
- Fewer small and medium-sized businesses will have to pay the Corporate Minimum Tax, and the rate will be cut from 4% to 2.7% in 2010.
This is in addition to the existing plan to eliminate the capital tax . Capital tax was already eliminated for firms primarily engaged in manufacturing and resource activities in 2007. For all other businesses, the capital tax rate will be cut by 33% on January 1, 2010 and then completely eliminated on July 1, 2010.
Reduced Business Costs
- Most businesses will receive input tax credits (ITC’s) for sales tax they pay on many of their business purchases and capital investments, providing significant savings.
- The HST is eliminating cascading layers of PST–embedded tax hidden in the purchase price, making inputs cheaper.
- Businesses also save from the reduction of embedded tax in supplier prices.
Lower Compliance Costs
- Businesses will save over $500 million a year in administrative and compliance costs alone.
- Administration of a single tax instead of two means one set of forms, one payment and one point of contact for audits, appeals and taxpayer services.