Flaherty needs to update GST rebate, for harmony's sake - Metro US

Flaherty needs to update GST rebate, for harmony’s sake

With the next federal budget less than a month away, federal Finance Minister Jim Flaherty has a golden opportunity to enhance the GST new housing rebate structure to be consistent with Ontario and British Columbia approaches to housing under the HST.

Ontario and B.C. have both adopted a graduated approach to the HST under which the full tax rate of eight per cent in Ontario and seven per cent in B.C. is only payable on the portion of the house price over $400,000 in Ontario and $525,000 in B.C.

The graduated approach obviously reduces the overall tax payable on the biggest of the big ticket items — your new home — and would go a long way towards mitigating the impact of the five per cent GST, which is payable over-and-above the provincial tax.

Ontario and B.C. have also trumped the feds in the area of rebates to offset the impact of the tax. The federal government’s new housing rebate is just 36 per cent of the GST payable up to a maximum of $6,300. Meanwhile, Ontario is giving a 75 per cent new housing rebate to a maximum of $24,000 while B.C. is at 71.43 per cent to a maximum of $26,250.

Then there’s the matter of the clawback of the GST rebate. Under the extremely outdated GST framework, the new housing rebate is clawed back on homes priced at more than $350,000 and once you hit $450,000, there is no rebate payable. By contrast, the Ontario and B.C. rebates apply regardless of house price.

So we have a tax that is supposed to be harmonized for cost-effective collection, yet we have widely differing thresholds, rebates and approaches to the tax calculation.

For harmony’s sake, why not have the same graduated tax approach and threshold right across the country, federally and provincially, indexed on a go-forward basis? Flaherty knows that the current federal approach is woefully out-of-date. He knows the Ontario and B.C. models make the most sense. All he has to do now is make it right in the next federal budget.

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