February 15, 2010
Will the new HST (Harmonized Sales Tax) help or hurt the green industry? LO members have varied opinions. The new tax becomes reality on July 1, 2010.

Horticulture Review surveyed a number of LO members respected for their knowledge of financial matters. The biggest concern expressed by those surveyed is that homeowners will now pay an additional eight per cent on services required to maintain their homes, thereby resulting in a reluctance to take on landscaping projects. Service costs were previously exempt from PST. The new tax will now hit bills for utilities, home renovation labour, landscaping, snow removal and many others. The Ontario Real Estate Association estimates HST on these services will add $480 in annual tax to the homeowner, based on a family that budgets $500 per month for such costs.

Bad timing

“The biggest thing that I scratch my head about is the timing of it. Why would you cause this sense of additional expense to the consumer, when we are coming out of this difficult economic downturn? I can’t help but feel it will only cause more problems for many of our LO companies, especially in some of the harder-hit regions,” stated LO’s first vice president, Tim Kearney of Garden Creations of Ottawa.

“I still don’t see where an additional eight per cent tax taken from people’s pockets on our labour-intensive services will stimulate Ontario’s economy,” says Irene Belo of Green Valley Gardening and Landscaping of Etobicoke.
“The issue is the potential chilling effect on the consumer,” says Tony DiGiovanni, executive director of Landscape Ontario. “That’s where the problem lies for sectors that have never collected the PST and now will have to start billing for it.”

New LO president, Tom Intven of Canadale Nurseries, deals exclusively with the issue in his column, found on page 5. He writes that the tax will affect our members in different ways, depending on the type of business they operate. He feels that for most of our sectors, consumers will see higher prices with the addition of the HST at a time when consumers’ disposable income is being reduced by a new tax on essentials such as gasoline, utilities, Internet and all services for their home or leisure. “Growers will likely benefit the most from this new tax. Landscape contracting, lawn care, grounds maintenance, snow and ice, designers and lighting sectors will be hit hardest by the additional tax on labour fees, which comprise a large portion of invoices.”

Positive opportunities

Not everyone sees a negative in the new tax. “The actual increase in cost to the consumer will only be more like four to five per cent, because our businesses will no longer have to pay the PST on materials, or on our expenses in overhead,” says George Urvari, president of Oriole Landscaping. He adds that consumers will still spend, regardless of the new tax. “If someone is going to do a reno, for example, they may put it off....but eventually they will spend.”

Warren Patterson of Botanix - Barrie’s Garden Centre agrees with Urvari. “It’s rare for consumers to not make a purchase because of tax. Typically, they will make the purchase if they feel the base price is reasonable. They may, however, try to negotiate a better base price.” Patterson, who serves as chair on LO’s membership recruitment committee, feels the benefits from the HST will be numerous.

“Although this tax will bite us in many areas where we previously haven’t been taxed, as businesses we will find it much easier to to buy products tax-free. Remember, that this new tax will only apply to the end-user. We can pass these savings on to our customers,” says Nick Solty of Solty and Sons in Cookstown and a past president of LO.

This was echoed by another past president of LO, Bob Tubby, president of Arbordale Landscaping/Moonstruck Landscape Lighting. Tubby said, “The contract amount will now appear lower. Clients will see the eight per cent that they have been paying on materials, equipment charges and overhead related items all along. Don’t include taxes in your price to the client. And, be sure to state that all prices are subject to the HST. It helps to disassociate you from the taxman. Let your client do the math.”

Mark Bradley, president of The Beach Gardener in Brooklin and Landscape Management Network, says, “I believe that in time the HST will prove to be positive, and it will almost certainly have some negative impact on consumer spending in our industry in the short term.” He adds that, “The long term benefits of this tax will create a healthier economic atmosphere for us to operate our companies.”

“Companies should be encouraged, as the cost of doing business will decrease with the new tax because they will be able to claim back the 13 per cent HST just like the federal GST. This will mean an eight per cent savings for the equipment they buy or lease to run their businesses. For example, if a company leases a new pick-up truck for $700, plus tax per month currently, the business will pay the $35 GST and the $56 PST, but then claim back the GST of $35 as an input tax credit (ITC.) Beginning July 1st, companies may also claim the retail sales tax eight per cent (RST) portion of $56. Over 48 months, that totals $4,368. The tax credit will also be applied to down payments and buyouts at the end of a lease,” says Laura Catalano of Nisco National Leasing in Burlington. She also notes that on a purchase of a $35,000 vehicle, the business will claim back the 13 per cent HST for a total of $4,550.

Rob Tester, of TNT Property Maintenance in Kitchener, says he is a strong advocate of the HST and has been from the beginning. “The change will really help us. We will save on equipment and products with all the hidden taxes removed. Business owners will have a choice of passing the savings onto their customers, or maintaining their previous price levels. This presents a great opportunity for business people.”

Prosperity Partners program manager Jacki Hart of Water’s Edge Landscaping in Bala, says her thoughts on HST are mixed. “Every time there is a new tax introduced, consumers tend to recoil in horror and take their time to emerge, often months later, with an air of resigned acceptance. It behooves me to understand why the government would fork out billions in stimulation, followed by a sharp slap up the side of the head with a new tax.”

Solty says, “Our overhead will be affected due to the extra taxes we’re going to pay for accountants, lawyers and consultants, but how else are we going to pay for the socialist government that everyone seems to want?”

Tubby expects that there will be a spike in the number of clients wanting to pay cash in order to avoid paying taxes. “Clients will be angry with the tax collectors, it will be important to position yourself on the client’s side, as we become the ‘tax collectors’ for the government, and poorly paid for the service!”

Bradley predicts, “When the dust settles and the people of Ontario begin to reap the benefits of this tax relief program, we will certainly find that our province is financially stronger. Consumers will save money in many other areas, while many products will become cheaper as a result of the elimination of the multiple layers of tax. Eventually the people of Ontario will see a more balanced development and our industry will continue to see increased demand as we have over the last 20 years.”

Death and taxes

“There are two things in life we are not able to avoid death and taxes.  It just is what it is. We will stand firm on the new tax in my business, conduct ourselves with integrity, and be fair with our pricing,” explained Hart.

“I hope the government of Ontario and Finance Minister Dwight Duncan are very good in the field of promotion, because an awful lot will have to be done to convince the consumer that this is not just another tax grab,” says Kearney.

Irene Belo asked, “If registering our concerns with our Premier’s office, or doing a full scale protest at Queen’s Park doesn’t make any difference, then the question I have, as a citizen of this province is, what does? Where has our freedom of speech gone? Do we actually have a voice, and if so why isn’t it being heard loud and clear by the government bureaucrats and politicians?”

“Overall, the government of Ontario needed to raise more money through taxes, because they are running a deficit (We are not going to grow our way out of it). They could do it either through payroll taxes (what you make) or HST (what you consume). A consumption tax is always the best, because it is not so visible. It’s little bit every day, rather than every pay cheque,” says Patterson.

Urvari notes that in the long run, it will benefit our export industries as input tax costs will not be passed on to foreign buyers, thereby helping our exporters sell product and create jobs. “It will also encourage our industry to invest in capital to become more efficient and productive. If I buy a 100K crane truck, I will get the 8K in PST back and perhaps be more efficient,” he says.

The HST will generally apply to services performed on or after July 1, 2010. The HST will not apply, however, to a supply of service if all or substantially all (90 per cent or more) of the service is performed before July 2010.
The Ontario Real Estate Association (OREA) estimates that the HST will add $1,449 in new taxes to an average resale home costing $302,354. OREA also estimates that the HST will add an estimated $262 million in new taxes annually to residential real estate resale transactions.

A report by the Canadian Centre for Policy Alternatives says low- and modest-income families will come out slightly ahead under the HST, which includes increased property and sales tax credits and income tax cuts; households with incomes above $100,000 will come out just slightly behind. The CCPA describes itself as an “independent, non-partisan research institute concerned with issues of social and economic justice.” The main office is located in Ottawa.

The provincial government’s website on the HST may be found at www.ontario.ca/taxchange.