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Progressive tax treatment big win for Province's new homebuyers

Toronto, On., June 19, 2009 -- The Provincial government has taken positive steps to improve the Harmonized Sales Tax on new homebuyers and renters across Ontario. The move to a progressive tax structure and the extension of the HST rebate to rental housing should be welcome news to homebuyers and renters across Ontario, particularly in the Greater GTA.

On budget day, March 26, the Building Industry & Land Development Association and the Ontario Home Builders' Association complimented the Provincial government for protecting homebuyers of under $400,000 product by instituting a very generous 75 per cent tax rebate (compared with the federal GST rebate of 36 per cent), thus ensuring revenue neutrality (homebuyers would pay no more or less tax than previously).

At the same time, BILD and OHBA noted that while the threshold was an improvement over the federal threshold of $350,000, the impact of the HST on new homes over $400,000 would have a very deleterious impact on housing affordability and residential construction employment.

The problem with the $400,000 threshold is that the market gets skewed around that number. As well, the threshold was too low for the Greater GTA where nearly half of all new homes and condos cost more than that.

"The Provincial government's decision to move to a progressive tax structure, under which the full HST will be charged on the amount of the purchase price over $400,000 instead of on the entire purchase price is enlightened, responsive and consistent with its initial budget focus on protecting new homebuyers," said BILD President and CEO Stephen Dupuis

"The move to a progressive tax structure is clearly intended to benefit new homebuyers as the ultimate taxpayers. The progressive tax structure dramatically reduces the quantum of the tax increase," Dupuis added. He cited an example of a $500,000 home where the PST, net of input tax credits, will decline from $30,000 down to $6,000, a much more palatable amount from the standpoint of housing affordability. Pending any complementary changes federally, the GST on that same house would be an additional $25,000.

"We said from the outset that we were not opposed to harmonization, in fact we believe it is the right long-term approach for the Province, however we also made the point that housing is different, a fact the Province acknowledged on budget day and has underscored with these amendments to the tax structure," said BILD Chair Leith Moore.

"The provincial government's adjustment to the tax treatment of new homes means that families can continue to pursue the dream of homeownership while the industry can continue to contribute to the economic growth of this Province," Moore added.

Moore called on the federal government to follow the Province's leadership in moving to a progressive GST tax structure in Ontario if not increase the GST rebate thresholds to $550,000-$700,000 based on the CPI increase since the GST was introduced in 1991. "The next step is to challenge the federal government to improve the current GST structure as it relates to both new homes and professional renovations," Moore concluded.

"BILD will continue to advocate on behalf of homebuyers and homeowners with respect to any and all taxes, fees and levies affecting housing affordability and choice," Dupuis vowed.

With nearly 1,400 member companies, BILD, formed through the merger of the Greater Toronto Home Builders' Association and Urban Development Institute/Ontario is the voice of the land development, home building and professional renovation industry in the Greater Toronto Area.  BILD is proudly affiliated with the Ontario and Canadian Home Builders' Associations.