10 simple HST myths

http://www.theglobeandmail.com/blogs/andrew-steele/10-simple-hst-myths/article1377589/

1) “The HST is a tax grab.”

The CD Howe Institute found the B.C. and Ontario HST’s likely revenue neutral due to the generous rebates for new homes and other sectors. The study is from last summer and recently announced relief on low value purchases under $4 in Ontario makes this even more obvious.

Reinforcing that finding, this week’s report from the Roger Martin task force on the economy says that “increased revenue from the harmonized sales tax is matched by reductions in corporate and personal taxes and by tax credits. The effect is revenue loss.”

The HST is not a tax grab. The Ontario government will actually lose revenue. That accusation is demonstrably false.

Applying the same logic as those who object to imposing HST on legal services, presumably the reduction of the GST to 5% should have measurably increased access to justice, yet I don't seem to recall anyone applauding the Harper government for it. And reducing personal income taxes increases disposable income, which also increases the amount of money people can spend on legal services, thereby, one would assume, increasing access to justice. And so on.

I don't question the sincerity of the objections to imposing HST on legal services, but slogans such as "taxing justice" really do no justice to the issue, so to speak. The effects of changes to consumption taxes need to be looked at in a broader context, both that of other tax changes and that of government policy generally.

I doubt that Mr Shurman will mention the business interests that so pressingly want the harmonized tax because it allows them to get input credits for all of the sale tax they pay and simplifies their accounting hugely. Retailers will get the simplification too, but will face some unhappy customers if they sell things that have not been subject to both taxes before.

The reason I referred to the imposition of the HST in this case as a "tax grab" is because of the way this new measure is being sold to the Ontario public. Both our Provincial and Federal politicians have been insisting to anyone who will listen that the conversion from GST+PST to HST is "tax neutral" at worst and is more likely to reduce the tax burden of the average citizen.

I believe in the case of previously un-taxed services such as legal fees, there is a compelling argument to dispel this fiction. The HST must, by definition, dramatically increase the cost of accessing legal services in this Province. It is therefore disingenuous to market it is anything but what it is — a new tax designed to generate revenue.

Your comment also made a connection between new taxes and the funding of vital access to justice initiatives such as legal aid. My position might well be very different if we heard that the new revenue being collected off of HST on legal fees was to be invested in enhancing legal aid rates for those who currently cannot adequately obtain representation. I can assure you that no such promise has been forthcoming.

It is important for all of us to also contact our MPPs to let them know what we think. Go to http://www.ontla.on.ca for contact info.

Despite that deficit, Ontario's criminal lawyers are boycotting serious cases because the legal aid fees are not high enough. They have a strong case for a raise – and the government has put some more funds into it, considered insufficient by the lawyers – but without more taxes on something, where is the extra supposed to come from?

Legal bills have been subject to both PST and GST in BC for some time now.

The late Dugald Christie Esq. challenged the levy of PST on legal accounts. Wikipedia states as follows:

Christie is most noteworthy for a 2005 court challenge of a British Columbia law that extended provincial sales tax to legal services. Christie argued that the law unjustly infringed on the constitutionally-protected rights of low income people to access the justice system. He met with partial success at the Court of Appeal,[2] but a further appeal at the Supreme Court of Canada overturned the lower court's decision on May 25, 2007.[3][1]

The only 'improvement' of bringing in the HST would be that a law firm would only need to submit one (federal) remittance rather than two (federal and provincial) as the case here in BC.

But the arguments against the imposition of tax on legal accounts have fallen on deaf ears, at least in the BC experience.

Regards,

Dave Bilinsky
daveb@thoughtfullaw.com