ottawa –
Congressional budget officials said Monday that the federal GST holiday could cost states with harmonized sales taxes up to $2.7 billion if they seek compensation.
However, the decision by some provinces with HST not to require compensation for some of the revenue losses has significantly reduced costs for Ottawa.
The Liberal government plans to increase federal sales tax on a number of items between Dec. 14 and Feb. 15, saying it aims to help people struggling with affordability.
All Canadians save at least 5% in goods and services tax on purchases such as children’s clothing, video games, and restaurant meals.
However, in Ontario and the Atlantic provinces, provincial and federal sales taxes will be combined into a unified sales tax, meaning people in those jurisdictions will receive a significant tax reduction of 13 to 15 per cent.
The PBO estimates that the tax cuts will cost the federal government $1.5 billion, which is in line with the Liberal Party’s own estimate of $1.6 billion.
But the budget watchdog says it would cost $2.7 billion if provinces implementing a harmonized sales tax did not waive the compensation requirements in their agreements with Ottawa.
Ontario, which stands to lose the most HST revenue, has said it will not seek compensation from Ottawa.
Colin Bracher, a spokesperson for Ontario Finance Minister Peter Bethlenfalvy, said the measure “will deliver nearly $1 billion in additional relief to Ontario families.”
A spokesperson for Finance Minister Chrystia Freeland encouraged all states to waive sales tax following the PBO report.
“We hope all provinces will join us and offer their residents a share of the tax relief over the holiday period, as Ontario, P.E.I., and Newfoundland and Labrador have done. will help all Canadians in all provinces,” said Catherine Cuplinkas. statement.
Saskatchewan Premier Scott Moe said his province will not match Ottawa’s GST holiday.
He said a portion of the state sales tax goes to local governments, and the government has taken other steps to reduce costs, including cutting personal income taxes and eliminating carbon taxes from home heating.
This report by The Canadian Press was first published Dec. 9, 2024.
With files from Jeremy Simes in Regina
