Swingers of hammers and slingers of hash are expecting their respective industries to see an immediate improvement when the harmonized sales tax is replaced by the old provincial sales tax regime April 1.
Both homebuilders and the restaurant industry, the most vocal opponents of the HST when it was introduced in 2009 and enacted in 2010, expect the return to the old system to immediately affect the bottom line.
“April 1 is incredibly important for us and we are hoping the 2.7 million people we serve every day will celebrate the return to food-tax fairness by spending more in their local restaurants,” said Mark von Schellwitz, Western Canada vice-president for the Canadian Restaurant and Foodservices Association. “All restaurant meals become seven per cent cheaper April 1.”
As a result, the industry, which painted a doom-and-gloom scenario when the HST was introduced, is expecting sales growth to nearly double in B.C. this year — to 5.1 per cent from 2.7 per cent last year.
“That follows a dismal year in 2011, when sales fell 2.3 per cent after the tax was implemented,” von Schellwitz said.
While that 2.3 per cent drop represents a $230-million loss in 2011, the industry had been anticipating a loss of closer to $750 million as a result of the HST.
But von Schellwitz was quick to add the industry also lost 7,000 jobs as a result of the HST.
“There’s no question we saw a real impact and there are some jobs that can’t be quantified — how do you quantify someone who was getting 30 hours a week being cut back to 20 hours a week as a result of slower sales?”
There’s no doubt in the minds of most homebuilders that the HST limited their activity over the last two years. New homes that were previously exempt from provincial sales tax were subject to the 12 per cent HST.
“The HST was a brutal tax impacting the housing industry,” said Casey Edge, executive director of the Victoria branch of the Canadian Homebuilders Association.
Edge notes that in 2011, Victoria experienced a 10-year low in single-family housing starts, which deteriorated again in 2012.
While the province introduced mitigating measures to offset the effects of the HST, it didn’t seem to have much effect in the marketplace.
When it introduced the HST, the province provided a rebate of a portion of the tax, but didn’t cover the full amount of the tax on new single-family homes in expensive markets such as Victoria and Vancouver, where the average price is more than $600,000.
To offset the increase in costs, the province raised the new-housing-rebate threshold to $850,000 from $525,000, meaning homebuyers at the top end of the scale were eligible for a rebate of $42,500 — or 71.43 per cent of the provincial portion of the HST.
Buyers of new homes costing up to $525,000 were previously eligible to receive the rebate of 71.43 per cent of the provincial portion of the HST, up to a maximum of $26,250, while homes over $525,000 received a flat rebate of $26,250. Buyers had to pay the HST beyond that threshold.
Edge said with the spectre of the tax now gone, the industry is cautiously optimistic for the rest of 2013 and 2014.
“We are hoping for a significant boost in the marketplace,” he said. “We don’t know what the pent up demand is but we know there is some out there especially on custom homes over $1 million where the new housing rebate didn’t cover off some of the cost.”
Edge said it will also improve the home renovation market and could cut down on the growth of the underground economy as homeowners sought relief from added taxes.
aduffy@timescolonist.com
