May 12 - HST “simply not good policy,” BMO says

May 12, 2009

HST “simply not good policy,” BMO says

If not for the cover page on the BMO Capital Markets Economics Special Report on the HST, you would swear you were reading an internal BILD document – that’s how consistent this independent, third-party review of the impacts of GST/PST harmonization is with BILDs position prior and subsequent to the March 26 Provincial budget.

The BMO Report, titled Home Truths: The Heavy Impact of Ontario’s HST on Housing, by Douglas Porter, Deputy Chief Economist and Sal Guatieri, Senior Economist, echoes and even amplifies BILDs criticism of harmonization as it affects new housing.

The very first sentence notes the proposed HST threatens to add “further stress” to the homebuilding industry and urges a “reconsideration” of the tax in light of the “hefty burden” on new homebuyers in the GTA.

In a section on consequences of the HST on new homes the BMO report asserts that homebuilders could scale back construction plans, further undermining a weak sector that has already accounted for a sizeable number of job losses.  “The Greater Toronto Area and Toronto in particular, would face the bulk of the losses given their much higher share of homes priced above $400,000,” the report states.

The recommendations in the BMO report exactly mirror those made by BILD prior to or since the budget, i.e., impose an effective 2 per cent provincial tax rate across the board or go to a graduated tax structure on new homes over $400,000.

The BMO report concludes that “raising taxes on a product that is often considered an investment, such as housing, is simply not good policy.”

To read the entire BMO report, please click HERE.