TAX NEWS - June 2010

Canada Tax: HST rebate now -- pay later

It may seem like found money, but the HST rebate cheque Fola Fewusi and 6.5 million other Ontarians will receive next week will do little to soften the blow of the new tax, residents say.

"It doesn't do anything for me," said Fewusi, 38, who works in IT in Detroit. "I have to pay more for my gym membership, more for gas. It's not going to balance it out.

"It's just a fact."

The first of three HST rebate instalments will be sent out Thursday by Revenue Canada to all Ontario residents who filed a 2009 income tax return.

The so-called "transition payments" will vary depending on your individual situation.

And, if your tax refund is deposited directly into your bank account, your HST rebate will follow suit.

Families, including single parents and senior couples with an annual income below $160,000, will receive payments totalling $1,000, while individuals with an annual income below $80,000 will receive three payments totalling $300.

Higher earners will receive less, but the threshold for the payments is much lower than for other rebates, such as the GST.

"That's great," said David Silveira, 34, a music promoter who was unaware of the extra money coming his way.

"I think $100 back is great, but I think they're going to take back $800 per household.

"They're sugarcoating it."

Silveira said the looming HST is already affecting his business, because until now as a service industry he only paid GST, but now he will have to pay the compound 13 per cent tax.

"My expenses are going up now," said Silveira.

"A $25 ticket is now going to be a $28 ticket. I've had to turn down shows because of it. It's going to cause me some grief. It's going to hurt businesses that only deal with services."

The HST takes effect July 1 and will be applied to many goods and services that were previously exempt from the provincial sales tax.

The next rebate payment will be made in December and the last in June 2011.

The Liberal government said in its budget earlier this year that "replacing the PST will help eliminate the hidden sales tax that many products carry. Few people realize that the PST is charged on various businesses costs throughout the supply chain.

"Ultimately, this hidden tax is added to the cost the consumer pays at the cash register.

"However, there will be a transition period as businesses adjust prices to reflect their cost savings."

GM retiree Hadi Mandalawi, 66, was unaware of the small windfall, and disagrees with the tax.

He said he has no plans for the money. "$100 is not going to pay my mortgage," said Mandalawi.

Hairdressing student Brittany Lenhart was surprised to learn of the cheque she'll be receiving, and quickly determined what to do with it.

"It's going to my Visa (card)," said Lenhart.

The tax preparation firm H&R Block commissioned a poll of Ontarians by Harris/Decima that found 26 per cent of respondents believed they earned too much money to receive the benefit, and only 45 per cent of residents knew that filing their tax return triggered the benefit.

British Columbia is also switching to the HST on July 1 but is not providing its residents with rebate cheques.