GST And PST To Become HST As Ontario Ups Your Taxes
Welcome to your life in July 2010. That's when the new harmonized tax that combines the old GST and
PST into one 13% tax takes effect. It will force you to pay more for a wide range of goods. As was widely
expected, the government is following the lead of Quebec, New Brunswick, Nova Scotia and Newfoundland
and Labrador by harmonizing the 5 per cent GST and the 8 per cent PST into one blended tax - the HST or
harmonized sales tax. How can it cost more if the previous GST was 5 per cent and the old PST was 8 per
cent? The answer is that many items were exempt from the provincial hit under the old method. But with
certain exceptions, the new one forces you to pay that extra amount where you never had to before.
The change means another expense to drivers - they'll pay even more for gas, as the new charge will increase
the taxes they'll have to pay out after every fill-up. Your morning cup of coffee will eventually cost you a
bit more. So will airfare and taxi rides. And while there will be some continuing exemptions to keep
Ontario's taxman out of your pocket, you'll still wind up paying more than you did before for many things
you currently buy now.
PST will be now charged on:
Newspapers, Magazines under subscription, taxi, bus, airplane and train fares, Gasoline, diesel fuel and
propane, Home Internet services, Vitamins, Gym and fitness memberships, Bicycles (and related safety
equipment) costing less than $1,000.
Some items will remain exempt from additional taxation. Those include:
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Basic groceries such as flour, sugar, spices, breads, cheese, fruits, vegetables and milk;
Prepared foods sold by an eating establishment for $4 or less;
Children's clothing, diapers or footwear costing $30 or less;
Drugs and medicine sold under a doctor's prescription;
Dry cleaning, carpet cleaning and hairstyling, barbering and beauty treatments;
Car washing or engine shampooing and houses under $400,000 are also off the PST list.
The new HST is designed to help businesses eliminate expensive red tape and supposedly create more jobs,
will be in effect on July 1, 2010 - Canada Day of next year. Critics are already calling it a shameful tax grab
at a time when the economy is in recession and people are already short of money. The average Ontarian
will be by paying an average of $1 200 a year, according to the Canadian Federation of Taxpayers.
There are also plans to cut corporate taxes from 14 per cent to just 10 per cent to make the province more
attractive to business. All this comes with a price that we'll collectively be paying off for a very long
time. The economic downturn means Ontario will be running a debt of $58.6 billion over the next seven
years. The government hopes to use reduce spending to finally balance the books by 2015-2016.
The government will be softening the blow a bit, by sending out three cheques totaling $1,000 to families
earning less than $160,000 a year. If you're single and make $80,000 or less, you'll get just $300. The first
cheque will come in June 2010, the second before Christmas of the same year and the final payment will
arrive in June 2011. But chances are neither amount will cover all of the added expenses.
NDP leader Andrea Horwath, says the Liberals are trying to "bribe" taxpayers with their thousand dollar
cheques - an amount she claims will do little to cover the extra they'll have to pay out because of the
increases. And she notes the last one is strategically delivered just a few months before the next fixed
election date in 2011.
CityTV News. http://www.citytv.com/toronto/citynews/life/family/article/9642--how-will-the-budget-affectyour-family (online).
HST Assignment Questions
1. What is the HST?
2. What makes the HST different from having 2 separate taxes?
3. Name 2 provinces that have HST.
4. What are 3 examples that PST will be charged on?
5. What are 3 examples of PST exempt items?
OPINION QUESTIONS:
6a.Why did the government send out cheques to the taxpayers?
b. Do you think that giving out these cheques was a good idea? Explain.
7. If you were the Premier of Ontario, would you continue to support the HST? Why or why not? Explain
your answer.
8. In your opinion, what are better ways for the provincial government to raise money instead of raising
taxes? Explain.
9. Maria’s Coffeehouse sells 25 cups for of coffee for $1 each to Mrs. Robbins’ class. Mrs. Robbins pays
cash. Give the journal entry for the seller including the HST. (Use HST Payable at 13%)
In the books of the seller:
General Journal
Debit
Credit
10. Give the journal entry for Mrs. Robbins’ records (from the purchasers point of view). Use the account,
Coffee Expense. (Calculate HST at 13%)
In the books of the purchaser:
General Journal
Debit
Credit