To western Mississauga realtors on the single sales tax
How the proposal will affect you

In the days leading up to Ontario’s March 26 Budget for the fiscal year 2009-2010, I received a number of e-mails from realtors, and people in that sector, dealing with the impact of the proposed single sales tax on the housing market. Though the 6th annual Mississauga Budget Breakfast was a standing-room-only event this year, we didn’t have any questions from people who do what you do for a living. It is my pleasure to have realtors among my own circle of friends, and I know how hard you work for your clients. I looked into the assertions and issues raised in your e-mails, and the issues raised by others who expressed similar views.

Context of tax reforms proposed in the 2009-10 Ontario Budget

Though the current global economic problems did not begin in Ontario, nor in Canada, our challenge is to ensure that as the world emerges from the recession, Ontario in particular, and Canada in general, will be better positioned to remain competitive and attract the jobs and investments that will drive our economy in the decades to follow. In short, we need to be able to attract the business, professional and working people who will need the homes you will sell to them.

Throughout the world, the overwhelming majority of countries have already moved to a value-added tax model similar to that proposed in Ontario’s 2009-10 Budget. The businesses whose activities drive the demand for houses here find other jurisdictions more competitive than Ontario, where presently we tax a sales transaction two times; by two levels of government; at two different rates; under two sets of rules; and administered by two independent bureaucracies.

Along with some $10.6 billion in permanent tax relief over three years, Ontario has proposed to cut the corporate income rate for small businesses; reduce the general corporate income tax rate; cut the processing and manufacturing corporate income tax rate; and eliminate the corporate income tax small business deduction surtax. Once implemented, these reforms would cut Ontario’s marginal effective tax rate on new investment by half, making Ontario one of the most competitive jurisdictions in the industrialized world for new investment.

Single sales tax and realtors

As realtors, you are net winners when firms and successful people come to Ontario to set up companies, pursue careers, and do business. The bulk of the comments sent to me focus on the proposed single sales tax. This single sales tax would combine the 5 percent GST with the 8 percent PST at a combined rate of 13 percent.

• The single sales tax would not apply to the price of resale homes, though it would apply to the commission paid by the vendor on such a sale. The purchaser of a resale home would not be affected at all;
• Realtors already pay GST and PST on many of the goods and services you consume in the act of doing business. For example, such things as flyers; cards; computers; office equipment and supplies; cell phone services and so on are often subject to both the federal Goods and Services Tax and the Ontario Provincial Sales Tax;
• Under the proposed system, the taxes paid by realtors on services and supplies they already buy would be reimbursable through the use of input tax credits. This increases the gross margin from commission income earned by a realtor;
• Most consumers and home-buyers will receive transitional support in the form of three direct payments, beginning in the summer of 2010, as well as reduced income taxes. Some 93 percent of Ontarians will pay less personal tax. Families and individuals with as much as $80,000 of personal income receive an average tax cut of ten percent.

Widespread support for single sales tax

The Provincial Building and Construction Trades Council of Ontario, which represents more than 100,000 unionized construction workers in Ontario supports the move to a single sales tax. So does the Ontario Chamber of Commerce; the Mississauga Board of Trade; the Certified Management Accountants of Ontario; the Canadian Manufacturers and Exporters; the Canadian Federation of Independent Business and many others whose business activities drives demand for homes.

I have taken seriously the issues realtors and others raised, hence the detail on my web site. To all those who e-mailed, I hope this response has addressed your issues. If there is something else you'd like answered, here are a few other sources:

Other information sources

• Read about the 2009-10 Ontario budget straight from the Ministry of Finance;
• Read the Ministry of Finance technical bulletin on real estate;
• Read, or download the entire Ontario Budget, right from the source;
• Call the Ontario Budget hotline with qustions: 1-800-337-7222;
• Details on Ontario's proposed Comprehensive Tax Reform package;
• In Mississauga, the CA firm of Sidler and Co., LLP were one of the partners, with the eight Mississauga and Brampton MPPs of the 2009 Budget Breakfast. See Sidler's analysis of the 2009 Ontario Budget;
• If I can help, e-mail me. I'll either find you an answer, or suggest a place you can go to look it up.