GST hous­ing re­bate hasn’t kept up with times

Winnipeg Free Press - Section G - - FRONT PAGE -

WBy Mike Moore HEN the Goods and Ser­vices Tax was in­tro­duced in 1991, the fed­eral gov­ern­ment rec­og­nized that it would un­fairly in­crease fed­eral sales taxes on new hous­ing, thereby neg­a­tively im­pact­ing af­ford­abil­ity. The GST New Hous­ing Re­bate was de­signed to ad­dress this prob­lem. At that time, the gov­ern­ment es­ti­mated more than 90 per cent of new homes in Canada were priced at less than $350,000. This was the ba­sis for es­tab­lish­ing the thresh­old for the full re­bate at $350,000 or less, with a par­tial re­bate for homes sell­ing up to $450,000. The fed­eral gov­ern­ment made a com­mit­ment to ad­just the thresh­olds to re­flect changes in hous­ing prices. In their words, “The gov­ern­ment will re­view th­ese thresh­olds at least ev­ery two years and ad­just them as nec­es­sary to en­sure that they ad­e­quately re­flect changes in eco­nomic con­di­tions and hous­ing mar­kets.”

It’s been 23 years, and we’re still wait­ing for that first re­view. Since the GST was in­tro­duced, Statis­tics Canada re­ports the New House Price In­dex has in­creased by more than 60 per cent, how­ever GST thresh­olds re­main frozen at the 1991 lev­els. When the GST was in­tro­duced, more than 90 per cent of all new homes qual­i­fied for the full re­bate. Cur­rently, in Van­cou­ver 0.1 per cent are fully el­i­gi­ble. In Toronto, it’s 8.1 per cent. Regina and Cal­gary are both at 18.4 per cent. In Win­nipeg, the story is much the same. In 1991, a full 99 per cent of all new homes were el­i­gi­ble for the full re­bate. Cur­rently, that num­ber has fallen to 39.9 per cent. The GST, even at the now lower five per cent rate, is in­creas­ingly pos­ing a bar­rier to the af­ford­abil­ity of new hous­ing. Not only pur­chasers of new homes are dis­ad­van­taged by frozen thresh­olds. Since new and re­sale homes are com­pet­i­tive prod­ucts, in­creases in prices for new hous­ing are re­flected in higher prices for the re­sale mar­ket as well. A tax is a tax; there’s no way to con­ceal it. Taxes have greater im­pact over time, even though the con­sumer may have be­come more ac­cus­tomed to them. Mike Moore is pres­i­dent of the Man­i­toba

Home Builders’ As­so­ci­a­tion

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