# What is Harmonized Sales Tax? **URL:** \ **Category:** Factual Questions\ **Created:** [September 21, 2009, 8:01pm UTC](https://boards.straightdope.com/t/what-is-harmonized-sales-tax/510987 "2009-09-21T20:01:44Z")\ **Posts on this page:** 8\ **Page:** 2
**Author:** ![Euphonious\_Polemic](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/euphonious_polemic/32/3002_2.png) [@Euphonious\_Polemic](https://boards.straightdope.com/u/Euphonious_Polemic)\ **Post date:** [September 22, 2009, 2:27am UTC](https://boards.straightdope.com/t/what-is-harmonized-sales-tax/510987/21 "2009-09-22T02:27:12Z")
> [@The\_Lurker\_Above](#): > > In Ontario right now PST on most items is 8%, hotel rooms are 5%, alchohol is 10% and of course there are PST exempt items. And I’m sure there are more exceptions out there. Of course you’re right - my 7% is the BC example for PST. Our fabulous hotel room tax seems to be a separate entity from PST and is called HRT. It is 8%. I don’t know what will happen when we go to the HST ---
**Author:** ![qazwart](https://avatars.discourse-cdn.com/v4/letter/q/5fc32e/32.png) [@qazwart](https://boards.straightdope.com/u/qazwart)\ **Post date:** [September 22, 2009, 2:56am UTC](https://boards.straightdope.com/t/what-is-harmonized-sales-tax/510987/22 "2009-09-22T02:56:37Z")
> [@BlinkingDuck](#): > > Wait a second here…you guys have a large income tax, right? and 12% TWELVE PERCENT sales tax!!! > > WTH you guys spending the money on…wars of aggression? Oh my God! Them Frost-backs are coming down here and they’re going to try to burn Washington again! And, then they’re going to enslave us all with Universal Healthcare! Quick somebody tell Glenn Beck! I just have thing to say to youse guys: Try to do a better job this time around. The last time you burned Washington, they simply rebuilt it. ---
**Author:** ![BlinkingDuck](https://avatars.discourse-cdn.com/v4/letter/b/eada6e/32.png) [@BlinkingDuck](https://boards.straightdope.com/u/BlinkingDuck)\ **Post date:** [September 22, 2009, 2:17pm UTC](https://boards.straightdope.com/t/what-is-harmonized-sales-tax/510987/23 "2009-09-22T14:17:43Z")
> [@qazwart](#): > > Oh my God! Them Frost-backs are coming down here and they’re going to try to burn Washington again! And, then they’re going to enslave us all with Universal Healthcare! Quick somebody tell Glenn Beck! > > I just have thing to say to youse guys: Try to do a better job this time around. The last time you burned Washington, they simply rebuilt it. Hijack - nitpick. If the Canadians burned Washington D.C. then we sure kicked some Canadian ass at the battle of NEw Orleans! ---
**Author:** ![Grey](https://avatars.discourse-cdn.com/v4/letter/g/b782af/32.png) [@Grey](https://boards.straightdope.com/u/Grey)\ **Post date:** [September 22, 2009, 2:43pm UTC](https://boards.straightdope.com/t/what-is-harmonized-sales-tax/510987/24 "2009-09-22T14:43:44Z")
We only count the wins. ---
**Author:** ![Sunspace](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/sunspace/32/1250_2.png) [@Sunspace](https://boards.straightdope.com/u/Sunspace)\ **Post date:** [September 22, 2009, 3:30pm UTC](https://boards.straightdope.com/t/what-is-harmonized-sales-tax/510987/25 "2009-09-22T15:30:20Z")
> [@Spoons](#): > > Technically, you’re correct; although it’s my understanding a series of GST credits and rebates and other mechanisms means that it’s the consumer–the last person in the chain–who pays the full cost of the tax without being able to pass it along to anybody else. I’d guess that semantics about “value added vs. sales tax” don’t matter to the consumer who’s shelling out 5% GST (plus applicable PST) over the advertised price at the counter for a cup of coffee and a muffin. I know, I know; that’s why it was a nitpick. 🙂 I think that by agreeing to an HST, a province gives up the right to apply the provincial sales tax to different things that the GST is: the harmonized PST must be applied to the same things and only the same things as the GST. But does this mean that the rate of the harmonized PST must be the same everywhere it’s bundled into an HST? In other words, if Ontario and BC go for HSTs, will we still pay 7% + 5% in BC and 8% + 5% in Ontario? ---
**Author:** ![Northern\_Piper](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/northern_piper/32/5304_2.png) [@Northern\_Piper](https://boards.straightdope.com/u/Northern_Piper)\ **Post date:** [September 22, 2009, 7:14pm UTC](https://boards.straightdope.com/t/what-is-harmonized-sales-tax/510987/26 "2009-09-22T19:14:44Z")
The provinces keep that flexibility, subject to complying with notice provisions to the federal government about changes to the rate. For example, in the recent [Federal-Ontario Memorandum of Understanding](http://www.rev.gov.on.ca/en/agreements/moa_cita.html), which commits both parties to seek to implement a harmonised tax, Ontario agrees that the new Ontario VAT would stay at the proposed rate of 8% for two years, and thereafter Ontario could change it: > [@](#): > > The Canada-Ontario CITCA will confirm Ontario’s flexibility, subject to reasonable notice provisions, to: > > • increase or decrease the OVAT rate after two years from the date of OVAT implementation; Note that that Province cannot sign away its right to set its taxes at whatever rate it wishes - the Constitution gives the Provinces that power, and they cannot abandon it simply by an agreement, or even by passing legislation. However, they can sign an agreement with the feds in which they undertake to use a given rate for a set period, in return for the feds collecting the tax for them. ---
**Author:** ![Sunspace](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/sunspace/32/1250_2.png) [@Sunspace](https://boards.straightdope.com/u/Sunspace)\ **Post date:** [September 22, 2009, 7:56pm UTC](https://boards.straightdope.com/t/what-is-harmonized-sales-tax/510987/27 "2009-09-22T19:56:22Z")
Interesting that it’s explicitly referred to as an Ontario value-added tax there, which implies that it will be collected everywhere the GST is. My impression was that the provincial component of the HST was a sales tax at the final sale only. Guess I was wrong; an OVAT would certainly be easierr to collect. ---
**Author:** ![Northern\_Piper](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/northern_piper/32/5304_2.png) [@Northern\_Piper](https://boards.straightdope.com/u/Northern_Piper)\ **Post date:** [September 23, 2009, 3:28am UTC](https://boards.straightdope.com/t/what-is-harmonized-sales-tax/510987/28 "2009-09-23T03:28:00Z")
There wouldn’t be much policy reason for the feds to collect a provincial sales tax, without it being a VAT, just like the GST. They’re not interested just in harmonizing the tax base, but also the structure of the tax. The idea of the HST is not just that the taxable items are the same, but that the sales taxes as currently structured distort the market and build taxes into the cost of goods. It’s argued that a VAT does not do this, that it doesn’t distort market prices as much and keeps the prices of goods more competitive. That was one of the arguments for the GST in the first place - it replaced a hidden federal manufacturing excise tax with a VAT tax. So the feds favour VAT taxes as a general economic policy, and are encouraging harmonization to achieve that policy. I don’t know enough about the economics of taxation to say if the idea is sound, but that was the rationale. So I can’t see the feds being interested in the provinces just harmonizing the tax base; harmonization also includes the VAT concept. Provincial sales taxes now do operate much like the old hidden federal manufacturing tax, since manufacturers pay the provincial tax on materials they buy to incorporate into their product. They naturally build the cost of the tax into the price of the product that the consumer pays, and then the consumer pays tax on that hidden tax. So not only does it drive the price up, there’s double-taxation. At least, that’s the argument. Again, I don’t know enough about the economics of taxation to say whether it’s so serious a problem as to justify switching to an HST. [Previous page](https://boards.straightdope.com/t/what-is-harmonized-sales-tax/510987.md?page=1)