Last week the Liberal government in its throne speech announced that it would provide some HST relief to Ontario residents by providing an HST Rate Cut by rebating back the provincial portion of the Ontario HST. This rebate is available to consumers and small businesses effective January 1, 2017.
The first question is why a rebate? Why not a complete elimination of the provincial portion of the HST altogether? At the time of the announcement before reading any of the details, I was wondering if the government would introduce some sort of provincial tax credit equivalent to the provincial portion of the HST that Ontario residents would file with their personal tax returns each year and that way they could gear the tax relief to an income segment within the province but they didn’t, the rebate will show as a separate line on your electricity bill.
Big and medium sized business don’t qualify for the rebate and for any of those organizations with a revenue base in excess of $10 million are still going to be subject to the Restricted Input Tax Credit(RITC) rules for a few more years. As of July 1st of this year the restriction ground down to 50% of the provincial component of the HST being restricted. Though in the throne speech the Liberals did say:
Your government also intends to implement new measures to ensure that Ontario commercial and industrial ratepayers can also benefit from lower electricity costs.
They believe this can be done through the Industrial Conservative Initiative to encourage more companies to use electricity in off-peak hours or to put even simpler, run your businesses at night. However for the first five years of the introduction of HST in the Province of Ontario large businesses could not claim ITC’s on the provincial component of the HST. Since 2015 that reduced to a restriction of 75% and then to 50% this year. If the Liberal government is interested in helping large industries with the cost of power, why not eliminate the remaining two years on the RITC timeline and allow businesses to claim 100% of the provincial portion of the HST today.
This whole thing feels like misdirection often employed by magicians and illusionists. We want you to look left so you won’t see what is happening over on the right.
Energy costs continue to rise in the province of Ontario even with nuclear reactors, wind and solar projects covering the landscape. The fact that they are willing to rebate the HST to the consumer doesn’t take into account that if your energy costs go up 50% that a tax of 8% is only a small component. For example lets say you currently pay $250 a month in electricity costs. Excluding the Federal GST of 5%, the Provincial HST at 8% is equal to $20. So without the Federal GST, you would be paying $270 a month. If they eliminate the HST but electricity price were to rise by another 50% then your monthly costs excluding Federal GST would be ($250 x 1.5) = $375.
Wouldn’t you rather pay $270 vs $375?
The talk of an HST elimination by rebate suggests that a rebate may allow the government to eliminate it sometime into the future perhaps after a spring election in 2018 if they were to get re-elected and it has residents taking their eyes off the real issue which is rising energy costs in the province by dangling a HST rebate.