THE Canadian Home Builders' Association has served notice to the federal government that it's time to look at new housing and renovations in order to right both an old and a new tax wrong.
Although the federal budget does not come forward until much later, the time is ripe to make a case for bringing legislation up to date.
When the GST was introduced in 1991, a new housing rebate was introduced to ease the burden on consumers. This rebate reduces the actual rate of GST payable to 3.2 per cent from five per cent, depending on the price of the new home. When these GST thresholds were introduced in 1991, the federal government estimated 95 per cent of all new home buyers would be eligible for the rebate.
In the goods and services tax technical paper, it stated that the government would review these thresholds every two years and adjust them as necessary to reflect changes in economic conditions and housing markets.
However, the GST rebate thresholds for new houses have remained frozen since 1991, 20 years ago. The CHBA is asking the federal government to review this policy with respect to protecting housing affordability.
On the renovation side, the home renovation tax rebate is necessary to restore fairness in the tax system. Prior to the introduction of the GST, the nine per cent federal sales tax applied only to the materials portion of home-renovation expenditures. In addition, the FST was applied to the prices at the factory as opposed to the full retail price.
Since materials only account for a portion of the full cost of a renovation, it was estimated the FST represented only a 2.5 per cent tax on the delivered cost of a home renovation. The current GST taxes the same project at five per cent, twice the previous amount. In provinces where HST (harmonized sales tax) is in place, the tax burden is even greater.
Another bonus associated with a home-renovation tax rebate is its contribution towards battling the underground economy. By requiring homeowners to have receipts to back up their HRTR claims, the government would deal a major setback to underground operators and help legitimate, honest tax-paying contractors.
In the end, affordability must be the primary benefit of these tax-saving measures. The CHBA is taking its case to Ottawa in hopes that all may share in this benefit.
Mike Moore is president of the Manitoba Home Builders' Association.
