Consumers suffer under HST: Manitoba's Wowchuk

Consumers would suffer under HST: Wowchuk
Manitoba makes case against HST, says would cost consumers millions
December 15, 2009
The Canadian Press

Manitoba is making its case against harmonizing the province's sales taxes, saying consumers and government coffers would take a hit.

The province has released a report that details how much it would cost the average consumer if the GST were combined with the provincial sales tax.

The report said consumers would pay more than $400 million more, while businesses would save $510 million.

The study suggests the average consumer would pay $160 more for gas and $35 more for home heating each year.

The report said the government would also lose $134 million in revenue.

Finance Minister Rosann Wowchuk said an HST could hamper efforts to maintain stability in tough economic times.

"Manitoba does not support harmonization at this time because of the potential risk to the economic recovery and the burden it would place on Manitoba families at a time of economic uncertainty," the report said.

Manitoba is one of three provinces that hasn't brought in an HST.



Manitoba makes case against HST, says would cost consumers millions

By Chinta Puxley (CP) – 3 hours ago

WINNIPEG — A Manitoba government report says harmonizing provincial and federal sales taxes would save the province's businesses $510 million a year but cost consumers more than $400 million.

The average consumer would pay hundreds more for everything from gasoline to home heating to haircuts, says the report, which seeks to justify why Manitoba continues to resist the call of a harmonized tax.

The province itself would lose out on $134 million in annual revenue, says the report released Tuesday.

"Manitoba does not support harmonization at this time because of the potential risk to the economic recovery and the burden it would place on Manitoba families at a time of economic uncertainty," it says.

"Manitoba recognizes that the pace of the global economic recovery continues to be slow and that any decision to harmonize must be considered with particular attention to this economic reality."

Manitoba is one of the last provincial holdouts - along with Saskatchewan and Prince Edward Island - when it comes to harmonizing sales taxes. Ontario and British Columbia are phasing in the harmonized sales tax next July. Alberta has no provincial sales tax.

Finance Minister Rosann Wowchuk said it doesn't make sense to impose a new sales tax at a time when the economy is still in recovery.

"We've reviewed it and we are not doing it now," Wowchuk said. "The money that the federal government is offering on a one-time basis does not even cover the additional costs. We aren't prepared to do that."

The report suggests businesses would benefit from bringing in the HST and could pass those savings on to consumers. But the report also predicts the savings probably wouldn't be enough to offset the increased burden placed on consumers, who would pay more for items now exempt from federal sales tax.

"Prices faced by consumers would likely rise in the short term as tax costs are shifted to consumers, but economic research suggests prices may decrease by up to one per cent as savings to businesses are passed on to consumers in the long run."

Those with an average household income of $63,300 would annually pay $161 more to gas up the family car and $35 more to heat the family home, the report estimates. Family entertainment would cost an extra $63 more while haircuts could cost $30 more a year.

New homes would also cost more - up to $17,500 in HST for a $250,000 house. Tenants could also end up paying more in rent, the study suggests, since landlords would pass on their increased costs.

Proponents of a harmonized sales tax have argued that Manitoba will lose jobs and the provincial economy will suffer if there isn't such a tax. Business groups say an HST makes the province more attractive for businesses who would save taxes on goods they purchase.

But the government report points out that Manitoba's main trading partner is south of the border.

"Our main trading partner, the United States, applies a welter of RSTs at the state and local level and does not have a (tax) like an HST."

Manitoba businesses have benefited from the province's tax cuts and can be "supported with tax relief that does not burden consumers with the increased costs of an HST," the report says.

Even with one-time federal compensation, the province also can't afford to shell out $400 million a year, which would be necessary to cushion the impact on consumers through exemptions, the report says.

Although Manitoba is ruling out bringing in the HST for now, Wowchuk hinted that could change down the road.

"But for us, right now, this is not the step to take because we think it would be a very heavy burden," she said. "It would cost the province more money than would be gained from it."

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