A harmonized sales tax poses a threat to new Prince Edward Island homeowners as it could increase the cost of residential construction by up to eight per cent, a public forum was told Tuesday night (June 26).
The public session discussing the possible HST impact on home construction and renovations was held in Charlottetown.
The session was hosted by the P.E.I. Residential Construction Sector Council (PEIRCSC) with sponsorship from the Canadian Home Builders Association PEI (CHBA PEI).
Peter Brown, PEIRCSC president and owner of Bayside Builders in Summerside, said the group held the session not to promote a position on HST, but rather to raise some concerns and questions regarding the tax’s future effect on the sector.
“We think this is an extremely crucial discussion to have on either encouraging or discouraging Islanders who first of all own their own homes, or off-islanders to come and invest in our beautiful Island.”
The harmonized sales tax is set to be implemented April 1, 2013, making P.E.I. the final Maritime province to switch to the tax from the goods and services tax (GST) and provincial sales tax (PST). The tax rate on most items will drop from 15.5 per cent to 14 per cent, however, there will be fewer exemptions.
Brown said there are four primary concerns in the sector due to increased construction costs under the tax: job losses due to fewer homes being constructed, a growing underground economy, affordability for seniors and all new rentals, and first-time homebuyers delaying ownership.
Brown said, for the sake of discussion, the group estimated the cost of a new home increasing four to eight per cent for a homebuyer.
A presentation from Beth Gaudet, provincial tax commissioner, pegged the cost at three per cent.
Brown said the estimate came from an impact study done in N.S. and N.B. following the implementation of HST, where the average homebuyer paid an extra eight per cent.
However, Brown pointed out that, from their organization’s research, if every business passed on savings through HST, it would be a 3.5 per cent increase.
“I don’t understand the math, if you take an industry that is valued somewhere close to a billion dollars and you increase the cost to the end user by four to eight per cent, what happens?” he asked.
“Does everyone build an eight per cent smaller home? Do they wait eight per cent longer in their thinking and planning to build a home? Do they have to save eight per cent more before they can get into the homebuyer market? We don’t have answers, whatwe’re doing is posing the concerns.”
Richard Lind, a homebuilder who was president of the Canadian Home Builders Association of Nova Scotia when the province implemented HST in 1997, said they found that some had to hold off building their home but there was a major upswing in the industry before the tax was implemented.
He added that at the time the entire provincial economy was on an upswing, which also reduced worries of a burgeoning underground market.
“There was lots of work around for everybody, whether you were legitimate or underground. Although we saw the potential for an increased underground economy because of this new tax ... we took it in stride,” he said.
“The whole economy was on an upswing so the crunch that we felt from losing some things to the underground economy didn’t hurt so much. From what I understand, you’re not looking at a strong upswing in the economy right now in P.E.I.”
The province is hosting a community forum on the HST tonight (June 27) at the West Royalty Community Centre at 7:30 p.m.