Tax Harmonization

 

Tax harmonization refers to the process of combining the two separate taxes that people pay at the cash register. These taxes include the federal goods and services tax (HST) and the provincial sales tax. The different taxes are governed by different regulations rate variations, procedures and exemptions. In the process of harmonizing the taxes, the tax rules that govern the provincial sales tax are altered to match the rules regulating the federal tax. Toronto intends to combine the two taxes by coming up with major reforms on taxes. Some items that have been exempted from taxation are likely to be taxed under this system.

 

The prices of some commodities are likely to go up. Examples of such commodities include the price of gasoline, and the fuels used for heating. The electricity bills will have an added charge due to the taxes since it will not be exempt from the provincial sales taxes. Other goods that have been exempt from this tax include tobacco, newspapers and magazines as well as services such as haircuts and club membership fees. The fees charged by realtors are also subject to taxation unlike earlier.   This implies that very few items that were previously exempt from taxation will remain exempt from taxation. However items like children’s footwear and clothing as well as their special children car booster seats are still exempt from taxation.  

 

By combining the two kinds of taxes, the city is going to be in keeping with the trend in the other forms of taxation in around the world. This may act to reduce the cumulative costs of exports from the city. This is possible since the cost of the goods will be lowered allowing the city to have a chance at competing with others in exports and build the economic sector as a whole. Under this program, the businesses are able to claim taxes from the government unlike earlier when the cost of added tax was passed on to the consumers.

 

While this system may sound harsh, it is in the real sense an advantage to the consumers since there are policies such as tax refunds and exemptions that certain categories of people are entitled. This includes up to $1.1 billion in income tax cuts for individuals and refundable property tax credit that is offered to persons who have low and middle-incomes homeowners and tenants. Low and middle-income earners will also be entitled to refundable sales tax of up to about $260.  The tax harmonization process has however faced opposition since it implies that households will spend more money on utility bills and other such bills than they did earlier.

 

All other provinces in Canada have adopted this method. Different people have expressed their views on this program some in favor while others such as the conservatives have opposed the move. They base such opposition based on the current economic crisis in the world arguing that this is the wrong time to make such a move to increase taxes to the direct consumers.