FE Magazine 2009 No. 5 Sep-Oct - FRPO

CFAA Report
Sales Tax Harmonization
By John Dickie, President, Canadian Federation of Apartment Associations (CFAA)
In the Spring of this year, both Ontario and British
Columbia announced their decisions to harmonize
their sales taxes with the GST on July 1, 2010. Those
decisions will result in higher landlord costs and
higher rents for tenants in both those provinces.
Some Canadians have already gone through the harmonization
process. Shortly after the GST was introduced in 1990,
Quebec adopted the GST structure for its sales tax (and now
collects the sales tax for the federal government at the same
time as it collects its own provincial sales tax). New Brunswick,
Nova Scotia and Newfoundland harmonized their sales taxes
with the GST in 1997. The experience in Atlantic Canada and
Quebec was that harmonization quickly raised rents by about
1.5%. The effect on rents will be slower in Ontario because of
rent control, but inevitably cost pressures will force rents up.
The impact of harmonization is to extend the provincial
sales tax (PST) to a variety of new input costs that previously
were exempt. In the rental housing sector this includes
such costs as gas heat, electricity, maintenance contracts,
property management services, renovation contracts, and so
on, which make up a large part of the operating costs of
most rental housing providers.
However, the PST was to some extent embedded in those
costs because of being paid by the suppliers, and that PST
also flowed through into what they charged to landlords.
Now those suppliers will receive the benefit of the input tax
credits on the provincial sales tax component. Effective July
1, 2010, landlords should be able to negotiate somewhat
lower prices for contracts in industries which pay a lot of
PST, such as construction contracts.
Despite that, costs will certainly go up in most or all sectors
where the new tax adds the provincial tax component to the
GST. FRPO is working to obtain relief for Ontario landlords,
whether permanent or temporary. The BC government
has already announced that it will rebate the
provincial tax on electricity and on energy for home
heating, both for homeowners and for owners of rental
properties. Obtaining that relief in Ontario would be a great
help for landlords and tenants here.
CFAA is working with the apartment associations in both
Ontario and BC to make sure useful information is
exchanged immediately, and to ramp up the grass roots
input by landlords in the lobbying process. As an industry
we badly need to improve the
extent to which we are
heard by government.
In both Ontario and
BC, the apartment
associations do
effective government
relations
work, but the
lack of political
involvement by
most landlords constrains
our influence.
Time will tell what will result
from the sales tax
harmonization and
the efforts to gain
appropriate mitigation.
Regardless of
that outcome, more
work needs to be
done to gain more political involvement
by ordinary landlords of all sizes,
so that governments realize that imposing
costs on landlords has a negative
impact on them. F
FRPO is one of 17 members of the
Canadian Federation of Apartment Associations,
the sole national organization representing the
interests of Canada’s $40 billion private rental
housing industry, which provides homes more
than seven million Canadians.
13
The Voice of the Federation of Rental-housing Providers of Ontario