As of July 1, 2010 the provincial governments of Ontario and British Columbia will combine GST/PST taxes into a combined HST tax. Consumers will pay a harmonized sales tax (HST) of 13% in Ontario and 12% in British Columbia.

The provinces of Ontario and British Columbia currently have debt obligations of $193 Billion and $29 Billion respectively in 2009/2010 budget. With expectations of an interest rate hike by the Bank of Canada, interest payable on these debts will quickly rise. In Ontario alone, interest on debt is an estimated $9 billion annually. Both provinces were forced to spend billions from 2008 to 2010 to bail out industries and save/create jobs.

The combination of rising infrastructure costs, increased government spending and rising healthcare costs has forced the provinces to accumulate massive debt and deficits over the past 10 years. There are three ways to service debt:

• Default on loans (not a viable option)
• Cut spending (governments are not good at this)
• Generate more revenue ( Harmonized Sales Tax )

Welcome Harmonized Sales Tax (HST), the largest tax reform in the history of Ontario and British Columbia. A comprehensive tax reform package to reduce taxes for businesses by over $6 billion annually and simplify accounting dramatically. And don't forget, it will force consumers to help cover mounting provincial accumulated deficits and recession spending.

The true concern is, what does HST mean for the consumer?

Many goods and most services that were previously not subject to the provincial sales tax (PST) will now be subject to HST for the consumer.

For the consumer, many products/services will become more expensive, including new homes over $400,000, mutual fund fees, insurance, mortgages, food under $4, home electricity, natural gas, plane fares, taxi fares and much more. For businesses, the cost of doing business in these provinces decreases, thus saving them more money so they can grow.

The reality is that businesses will save money and provincial governments may or may not collect more taxes. The problem is that once the dust settles, will corporations in Ontario and British Columbia pass tax and administrative savings in excess of $6 billion annually on to consumers? Will there be enough competition in profit driven industries such as oil, banks, retail and real-estate for the consumer to benefit....

Or will the middle class of these provinces continue to be squeezed from increased taxes on many of the goods they consume the most?

Let the debate begin.

- http://MastermindGrowth.com