Back in March, when the Provincial and budget was announced, it was revealed that the PST and GST would be combined to form the Harmonized Sales Tax (or HST) in Ontario. When it was first announced that Ontario will be switching over to this system, I will admit that I was a little perturbed about it, as it means that the HST will be substituted for items that don’t even have PST on them – such as gas. But what does it mean for businesses? Well, there are some good points as well as some bad ones.

On the negative side, you’ll have to pay 15% tax on items that you did not have to pay for before – such as heating, gas, water, building repair services, plumbing… the list goes on. This means that, yes, we will have to pay more for some items than we previously had to.

There are, however, some good things that businesses can expect to see. Businesses will be able to use input tax credits for HST – so not all of the money a business collects as tax from a customer has to go to the government.

Similar to what businesses did previously with the GST, they will be able to deduct the HST paid on products and services that business purchases in order to run any commercial operations. Due to this, on average most businesses will end up paying less taxes, and theoretically the money that is going through the economy will be taxed less often than it had been previously.

It is also expected that this will result in Ontario becoming more attractive to investors due to these tax credits and rebates.

Ontario is not the only province to have HST instead of GST – currently, the Atlantic provinces have already been using it for a few years. When the harmonized taxes were introduced into the Atlantic provinces, they found that there wasn’t really much of a change as far as business goes – for example, it did not lead to more outsourcing, which is one of the concerns people in Ontario cite. As well, small and medium sized businesses found that the HST was more helpful to them than having to pay both taxes.

So what does this mean for you? Well, as a consumer it still appears that we get the short end of the stick, but if businesses can benefit as much as we’re told they will, then perhaps in this economy it’s not a bad thing.

If you do have any comments that you want to leave the McGuinty government, you can do so through their website.