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It's official - The GST and the PST are about to be joined in what some taxpayers say is an unholy union that will cost them a lot of money.
That was the major announcement confirmed as Finance Minister Dwight Duncan rose to deliver the long awaited recession-fighting budget at Queen's Park Thursday afternoon.
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 - that will add 13 per cent to a wide range of items and services that weren't covered by the provincial levy in the past.
Ottawa will give Ontario $4.3 billion in assistance to ease the difficult transition.
The change means another blow to drivers - they'll pay even more for gas, as the new charge will up the taxes they'll have to shell 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.
See what will be affected here.
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.
The new levy, 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 tatters and people are already short of money.
What else is in the document?
You'll be getting a tax cut to help out. The lowest rate will fall from 6.05 per cent to 5.05 per cent starting January 1
st next year, meaning you'll save roughly $200 for each adult and just under $380 for every child in your home.
See more on that here
.
The government had previously confirmed it was planning to spend $27.5 billion on infrastructure for roads, transit, schools and hospitals, designed to create 300,000 jobs over two years. Another $700 million will go towards skills training.
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.
And for a change your MPPs will feel some of the pain, with a pay freeze in 2009-2010 and a five percent chop in the number of bureaucrats in the public service.
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 deficit of $58.6 billion over the next seven years. The government hopes to use lean spending and reductions to finally balance the books by 2015-2016. But clearly getting there won't be half the fun.
Duncan insists he had no choice. "Our province is in the middle of a global economic and financial storm," he admits. "Our communities are caught in it, many of our family and our friends are hurt by it."
Here are the main budget highlights.
- Provincial sales tax to be harmonized with the GST as of July 2010, spreading the tax to a number of goods and services not currently subject to the PST. Small range of goods and new homes under $400,000 continue to be exempt.
- Sales tax increase to be offset by special rebates totalling $1,000 for families with an income below $160,000; singles with an income below $80,000 to get $300
- Sales tax change estimated to save businesses more than $500 million a year.
- Sales tax credit and property tax credits enhanced to save taxpayers more than $1 billion a year by 2011.
- Lowest provincial income tax rate falls from 6.05 per cent from 5.05 per cent on January 1st, cutting taxes by up to $205 dollars per filer and $379 per child.
- Deficit forecast at $3.9 billion for 2008-09 and $14.1 billion for 2009-10. Total deficit to hit $56.8 billion by 2015.
- $27.5 billion to be spent over two years to improve roads, hospitals and schools, creating and maintaining more than 300,000 jobs.
- $700 million over two years to be spent on skills training.
- Business taxes to be cut by $4.5 billion over three years starting July 2010.
- Cost-cutting measures include a pay freeze for MPP's for 2009-10 and cutting the size of the Ontario public service by five per cent over three years.
- Total program spending in 2009-10 up $11.1 billion to $99.6 billion.
- Economy forecast to shrink by 2.5 per cent this year but rebound to 2.3 per cent growth next year and 3.3 per cent in 2011.
In all, the entire plan is worth $109 billion.
Needless to say, the Opposition wasn't impressed with the document, calling it a naked cash grab at the worst possible time. Interim Tory leader Bob Runciman labelled it "worthless" and accused Premier Dalton McGuinty of plunging Ontario into the deepest deficit in its history.
And NDP leader Andrea Horwath went further, charging 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.
See more reaction here
And in case you were wondering, that money designed to help you absorb the tax changes? It will be tax free.
Some homes will be hit hard by HST
Government's Budget Page