News Release Archive
NEWS RELEASE (CNS706) -->> FINANCE--HARMONIZED SALES
TAX
FINANCE--HARMONIZED SALES TAX
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Tax breaks for libraries, rebates for new home construction and
full tax refunds for most businesses are among the benefits of
the new sales tax system unveiled today by Finance Minister Bill
Gillis.
"The new tax is a win-win for Nova Scotia," said Dr. Gillis.
"Government will collect $100 million less in taxes, and in
addition Nova Scotians will receive $53 million in income tax
breaks and targeted help. That means more money in the hands of
Nova Scotians, more money in the economy and more jobs."
The new tax system jumps and sustains the Gross Domestic Product
by point eight (0.8) per cent. That translates into 3,000 new
jobs over the next few years, he said.
A key feature of the new 15 per cent Harmonized Sales Tax (HST)
will be an increase in tax refunds to businesses operating in
Nova Scotia. Most businesses will receive full tax refunds,
called Input Tax Credits, on the new harmonized sales tax, not
just on the federal portion. This means a significant boost for
construction, exports, tourism, hi-tech and many other business
sectors.
The minister said businesses in Nova Scotia will experience many
competitive advantages under the new system. With full Input Tax
Credits, operating costs on everything from phone bills to
computers will come down. Many other business expenses will be
lower including hotels, meeting costs and meals.
"It all adds up to huge made-in-Nova-Scotia advantage. This gives
our local companies a reason to expand and grow, and it gives
businesses from away excellent reasons to locate in Nova Scotia,"
said Mr. Gillis.
For consumers a major benefit is the requirement for stores to
show prices with the tax included. A recent poll conducted for
the Department of Finance shows 73 per cent of Nova Scotians
prefer to have pricing that includes the tax. Dr. Gillis said
"For the first time in Nova Scotia the price on the tag will be
the price you pay. This will give Nova Scotians the power to
compare prices on an even playing field."
The new tax system is the result of an extensive consultation
involving more than 80 meetings with business and other
organizations over the past five months. The groups ranged from
the Forest Products Association to the Retail Council of Canada
to the Nova Scotia Exhibition Association and the Nova Scotia
Medical Society. A number of new measures resulted:
- The price of books will not increase under the new system.
Books will only be subject to the present 7% tax rate, not the
new 15% rate. In a related move by the federal government,
Finance Minister Paul Martin announced that public school,
college and university libraries will also get 100% of the HST
back. Books for these institutions will be sales tax free and
will cost less effective immediately.
- In Nova Scotia there will be a housing rebate for all buyers of
newly constructed homes. New homes under $150,000 will be
eligible for a combined 27% rebate of the harmonized sales tax.
"Coupled with decreased building material costs this will
ensure that new homes cost the same or less on April 1," said
Mr. Gillis.
- The government has also implemented a number of measures to
further put money back into the economy. All Nova Scotians will
receive a 3.4 per cent provincial income tax reduction. This is
the first cut in personal income tax in the history of
province. Low income earners will receive a second tax break,
an enhanced low income tax reduction program. In addition the
government has set aside $8 million to further assist low
income earners.
Dr. Gillis said the government has identified a number of issues
that will be addressed, including rebates of tax on the purchase
or conversion of vehicles for the disabled, before the tax system
comes into place on April 1, 1997. The government's intention is
to consult further and announce new measures before that date.
"This is a competitive deal -- and we say that with hope for the
future. This package will create jobs, grow the economy and make
Nova Scotia an even better place in which to live," the minister
said.
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Contact: Bruce Cameron 902-424-8787
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BACKGROUND INFORMATION
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THE NEW SALES TAX IN NOVA SCOTIA BY SECTOR
Construction:
* Removing the PST will mean tens of millions in savings every
year to the construction industry. It will result in lower
costs of building office towers, retail stores, industrial
manufacturing plants and municipal infrastructure such as
sewer and water lines.
* Building everything from houses to roads to factories will
cost less because the construction industry will be relieved
of tax on its business inputs.
* In Nova Scotia, special tax rebates for buyers of newly built
homes will protect the housing industry.
Commercial Cultural Industries and Entertainment:
* The tax on tickets for commercial productions -- movies,
concerts and sporting events -- goes down from 17.7% to 15%,
as the 10.7% Amusement Tax disappears.
* Full tax refunds (ie: Input Tax Credits) are particularly
important for the creators of movies, music and commercial
theatre. This sector currently has particularly high PST
costs. On April 1, 1997, they will have lower costs on vehicle
rentals, equipment rentals, computers, meals, and
accommodations.
* Not-for-profit associations (under $50,000) will not be
required to collect the new HST.
Exports:
* Exports from Canada will become completely tax free. Exports
to the rest of the country will become much more competitive.
* Input Tax Credits, particularly for our service sector, will
make Nova Scotia an increasingly competitive force in the
national and international marketplace.
Grocery Stores:
* Consumers will be paying less -- both in prices and taxes
-- at the grocery store.
* Basic foods will continue to be tax free. Other grocery store
items such as toothpaste, light bulbs and cleaning supplies
will be taxed at 15 % instead of 18.8%.
* Hidden taxes will be removed at each level of the production
chain, from farmer to store shelf.
Restaurants:
* Sales are expected to increase since the combined tax to
consumers will be lower (15%) than the current level of 18.8%.
* Business customers will be able to get a significant amount of
the sales tax back, as an Input Tax Credit, which should mean
a substantial increase in meals sold.
Tourism:
* Tourists from outside Canada will get back all taxes paid on
accommodations and goods they take back home. This translates
into additional demand for tourism-related products and
services -- and new jobs.
* Tourism operators will all benefit from full tax refunds on
goods and services purchased for use in their business.
Agriculture, the Fishery, Forestry and Mining:
* Full tax refunds will mean significant savings for these key
resource areas, allowing our goods to be even more competitive
-- contributing further to our important and growing export
opportunities.
* Dealing with one tax system will reduce paperwork and red
tape, also reducing the cost of doing business.
* Reduced costs may result in lower prices to consumers creating
additional demand for products.
Automobile repairs and purchases:
* The tax on automobile parts and labour goes down from 18.8% to
15%, making repairs less expensive.
* The tax on existing and new leases goes down on April 1, 1997.
* The tax on new vehicles goes down in stages. On April 1, 1997,
the HST will be 15% plus a 2% provincial tax. On April 1,
1998, the provincial tax goes down to 1% and is eliminated on
April 1, 1999.
Retail:
* Consumer polls show 73% of Nova Scotians want their prices
displayed tax-included.
* Businesses serving consumers must show their prices tax
included. Prices must be converted by April 8, 1997.
* Cash register receipts may show the price tax out with 15%
added at the end as is the current practice.
Financial Services:
* Financial institutions such as banks and life insurance
companies will pay a 15% HST on their purchases. They will not
get a full refund of the sales tax they pay.
* New rules have been developed for financial services ensure
fair and equal treatment to all Canadian financial
institutions. There will be no advantage or disadvantage for
these institutions to buy goods and services either inside or
outside the participating provinces.
Non-profit and public sector entities:
* Last spring, for public service bodies other than charities
and public institutions, the small supplier threshold was
raised to $50,000 in annual taxable sales from $30,000.
* Public sector entities under $50,000 are not required to be
registered for the new sales tax. They don't collect taxes on
their sales and are not eligible for tax refunds.
* Rebate application requirements for non-registered public
service bodies will be streamlined, reducing the cost and
complexity of administration and compliance for a large number
of smaller public service bodies.
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THE NEW SALES TAX IN NOVA SCOTIA
Expansion of the Tax Base
* Businesses, including those who provide services, pay tax on
the goods and services they purchase to operate their
business. Under the current provincial retail sales tax
system, the PST is a cost of doing business and is hidden in
the final price of all goods and services sold in the
provinces. The new system will eliminate the PST and the
Amusement Tax and the tax on electricity.
* Items to which the GST does not apply, such as basic
groceries, rent, purchase and sale of used housing, health
care and prescription drugs, will continue to be exempt under
the new system. This, together with the overall rate reduction
and the elimination of hidden taxes, means that the expansion
of the base will not increase the amount of tax paid in the
harmonizing provinces. In fact, total sales tax burdens will
fall. In Nova Scotia, $100 million less will be collected in
sales tax every year.
Tax-Included Pricing
* Consumers have expressed a strong preference for tax-included
pricing. 73 per cent of Nova Scotians polled by Corporate
Research Associates said that they prefer tax-included
pricing.
* Receipts and invoices will disclose either the amount of tax
paid or the rate at which tax has been charged. Many cash
register tapes can be pre-stamped with a simple statement that
15% tax has been added. Retailers must show the tax-included
price but may, in addition, show the tax-excluded price. The
tax may be added at the end as is the current practice.
Goods/Services Sold Into Nova Scotia
* The combined sales tax system will ensure that goods and
services sold into Nova Scotia from outside the province are
subject to the same 15% tax rate as goods or services sold
within the province.
* All Canadian businesses that are registered for the GST will
be required to collect and remit the HST on taxable goods they
ship into Nova Scotia or taxable services they perform in Nova
Scotia.
* Most businesses registered for the GST will be eligible for a
full refund of the 15% harmonized tax they pay on goods and
services used to conduct their business.
Goods/Services Sold From Nova Scotia
* The new sales tax system will require businesses in Nova
Scotia to charge 7% tax, not the new 15% tax to their
customers outside of the harmonizing provinces. Eg. To P.E.I,
Quebec, Ontario, etc.
* Exports from Nova Scotia, outside of Canada, will continue to
be zero-rated and thus free of HST.
Exemptions, Rebates and Credits
Homes
* Nova Scotia will provide a rebate on new home construction.
The rebate will be 18.75% of the provincial portion of the tax
paid on the purchase of the newly built home.
* The full rebate will apply to all new homes occupied as a
principal residence, up to a limit of $150,000. The rebate
will be frozen at $2,250. The provincial rebate will be added
to the current federal rebate.
* Under this combined program, approximately 27% of the total
tax will be refunded for 87% of the new homes constructed in
the province. The government is setting aside $6.5 million for
this program. This will ensure that new homes do not increase
in price as a result of the new sales tax.
Books
* In Nova Scotia, New Brunswick and Newfoundland, there will be
no tax increase for the purchase of books. Books will be
subject to a point of sale rebate of 8%.
* In addition, the federal government has announced a GST rebate
on books for schools, universities, and municipalities across
the country (which includes most public libraries) and certain
charities which promote literacy.
Tourism
* Tourists from outside Canada will be able to get back all tax
they pay on accommodation and goods they bring back home. Nova
Scotia is working with the tourism industry to design a system
that makes refunds work quickly and efficiently for tourists
leaving the country.
Fire Services
* Fire trucks will be eligible for rebates so that the price
does not increase as a result of the new sales tax.
Municipalities-Universities-Schools-Hospitals (MUSH) Rebates
* The present system of GST rebates for this sector will apply
to the full 15% HST.
Provincial Income Tax Cuts
* The Nova Scotia government, in a separate move, is also
providing the first ever cut in personal income taxes,
effective July 1, 1997. This is a cut of 3.4 % in the
provincial rate.
* There are also extra income tax breaks for low income Nova
Scotians: an enhanced low income tax reduction program and an
$8 million program of special assistance to Nova Scotians who
do not pay income tax.
Administering the New Sales Tax
* The new sales tax will be initially administered by Revenue
Canada. There will be a new joint federal/provincial border
and revenue agency. The new agency should be up and running by
January 1, 1998.
* There will be no layoffs at the Provincial Tax Commission as a
result of harmonization. Revenue Canada has committed to take
on 70 positions now. In addition, ongoing provincial needs for
fuel, tobacco and other tax administration, coupled with
natural attrition and early retirement, will ensure that there
are no layoffs.
Recovery of Tax by Businesses
* The present GST system will be maintained. The current GST
input tax credit rules will apply to the new harmonized tax.
All registrants, both inside and outside of the harmonizing
provinces, will be entitled to claim credits for tax paid at
either the 7 or 15 per cent rate on goods and services they
acquire for the operation of their business. In addition,
rebates will apply in some cases where input tax credits are
not available.
* Under the harmonized sales tax, the reporting requirements
will be the same. This will include the rules for remittance
of tax, returns, fiscal periods and reporting periods.
For more information: 1-800-731-7707
E-Mail: HST@gov.ns.ca
Internet: www.gov.ns.ca./fina/
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trp Oct. 23, 1996 - 4:25 p.m.
