Consumers should be told what will cost more under HST, NS premier warns

As Canada's rookie premier, Nova Scotia's Darrell Dexter is reluctant to give advice to his counterparts in other provinces.

But he has one suggestion for premiers who are contemplating harmonizing their sales taxes with the federal GST, or who have already done so.

"I think it's really important that citizens of provinces have a clear indication of just what that tax is going to look like, what goods and services are going to be affected," Dexter said in an interview.

"I don't think there's anything that inspires people to go to their local Tim Hortons and talk like a tax increase."

Dexter should know. Although he was elected as an opposition legislature member one year after Nova Scotia harmonized its sales tax in 1997, he has seen the HST stir up voter anger in provincial politics for more than a decade.

The Liberal government that introduced the tax in Nova Scotia was, by 1999, relegated to opposition with just 11 of the 52 legislature seats, partly due to consumer anger over the higher cost of gasoline, home heating fuel, electricity and other goods.

The sales tax on such items had more than doubled, to 15 per cent from seven per cent, because the harmonized tax applied to everything that had previously been covered by the GST, including many items which had been exempt from the provincial sales tax.

The Progressive Conservative government reduced the HST on home energy bills in 2006 and raised it in 2008. This spring, the New Democrats were elected for the first time in Nova Scotia history, with a promise to cut the tax on home energy one of their main campaign platforms.

It is the impact on daily consumer items that has given some premiers pause.

"We have always believed (the HST) is a shift from business taxes to consumers," said Manitoba Premier Gary Doer, who says he is willing to consider harmonization if the impact on consumers can be mitigated. Saskatchewan and Prince Edward Island, the other holdout provinces, have expressed similar concerns.

The Canadian Taxpayers Federation is calling on Ontario and British Columbia to release a full list of goods that will cost more when the two provinces enact a harmonized tax next July.

"Harmonization is a major shift in tax policy and, to date, governments have simply been announcing the changes without consulting with taxpayers or educating them, so consumers have been left to figure out for themselves how they will be impacted," said CTF spokesman Colin Craig.

The federation is also calling on governments to release estimates on how much more money consumers in Ontario and British Columbia will pay. When Nova Scotia harmonized its taxes, a provincial study estimated consumers would pay an extra $84 million a year, collectively.

Ontario has given reporters a partial list of goods that will cost more under the HST. Heating fuel, electricity, gasoline, tobacco, taxi fares, lawyers' fees, haircuts and other items will be taxed at 13 per cent instead of five. But the opposition has been pulling out other examples, such as funerals and maintenance work on condominiums, almost daily.

Rather than providing a website or other location listing all goods that will increase, Ontario is suggesting that people call the department's general line with questions.

"The Ministry of Finance ... has an information line that people are free to call, and are encouraged to, because these are significant tax changes and we are happy to take people through them," said Alicia Johnston, a spokesperson for Ontario Finance Minister Dwight Duncan.

In British Columbia, the list of items that will be taxed at 12 per cent instead of five includes electricity, home heating, restaurant meals and many more.

The HST also necessitates a little-known, separate tax on cars and trucks that are sold privately. Vehicles sold by private owners are currently subject to provincial sales taxes but not the GST. So under the normal rules of harmonization, private vehicles would not be taxed at all.

Provinces, however, have filled that particular void with a special all-provincial levy. Nova Scotia, New Brunswick and Newfoundland quietly brought in private vehicle taxes at 15 per cent when they harmonized.

The push for tax harmonization started with business groups, who say having to deal with two separate tax systems is inefficient and costly. Businesses also make big savings under harmonization because, unlike provincial sales taxes, the HST does not apply to so-called inputs -- goods businesses buy for their operations. The B.C. government estimates businesses will save $1.9 billion in taxes annually, allowing them to create more jobs.

Ontario and B.C. are also trying to soften the blow to consumers by exempting such items as diapers, children's clothing -- and in B.C.'s case, gasoline -- from the higher tax level. They are also offering income tax relief. B.C. is promising new tax credits to low-income earners. Ontario is offering a similar credit and one-time income tax rebates of up to $1,000 sent out in three instalments.

"We're in the midst of a global economic recession and governments need to act and the Ontario government is acting by bringing forward a package of tax changes that will help get Ontario moving again," said Johnston.