Special to The Star
Ontario MPP Yasir Naqvi will face some tough questions next month when he's expected to take part in a luncheon panel organized by the Association of Condominium Managers of Ontario.
As parliamentary assistant to Ontario Revenue Minister John Wilkinson, he'll be there to sell the new harmonized sales tax to a sector that will be hard hit. And for sure, the 250 condo managers expected at the Sept. 18 event will be a tough audience.
"He's going to get roasted alive," predicts Armand Conant, president of the Canadian Condominium Institute, who is also on the panel.
Condo managers, owners and representatives dread the HST, which will blend the 5 per cent GST and 8 per cent provincial sales tax into a single 13 per cent tax on July 1, 2010.
"We figure it's going to be a 6.5 per cent (maintenance fee) increase strictly related to the HST for roughly 504,000 condominium units in Ontario," says ACMO president Chris Antipas.
Just last week, the Condo Owners Association-Trinity Spadina, representing more than 200 condominiums in central Toronto, held a press conference, publicizing the negative impact of the HST on condos and its effect on affordability.
Some maintenance fee expenses, such as insurance and water, are GST-exempt and won't attract HST. But services, including management, concierge, housekeeping and consultants' contracts, now subject only to 5 per cent GST, will have the 8 per cent provincial portion of the tax tacked on for the first time.
Conant emphasizes that reserve funds will also be affected and require topping up. "Everything we see seems to indicate somewhere between 80 and 90 per cent of reserve fund items will be hit by the HST."
Early in June, Naqvi, MPP for Ottawa Centre, took part in a panel on the HST at a well-attended meeting at two Scarborough condominums, the Gates of Guildwood. His presentation was met with incredulity from residents with business experience, who disputed his view of the current PST and one of his key pro-HST argument.
Naqvi said that companies all down the manufacturing line pay PST, and consumers end up "paying tax on tax on tax." Combining provincial sales tax with GST, and establishing flow-through GST-style tax credits, he suggested, would lower prices and soften the HST hit.
"Mr. Naqvi does not know his facts or it is convenient for him to try and mislead," business owner and Gates of Guildwood condo director Wolfgang Kirchner commented by email after the meeting. "Anything that is bought by a business that is for resale is purchased with a PST exemption certificate; only the end user pays the tax, so no tax on tax."
In a recent telephone interview, Naqvi, a lawyer, reiterated his original argument for "modernizing" the PST: "The shoe manufacturer has paid 8 per cent on the leather, 8 per cent for the rubber in the soles, 8 per cent on the laces, and that all has become imbedded in the cost of making those shoes."
The March 2001 Ontario Retail Sales Tax Guide 400-Manufacturers, however, supports Kirchner's comments, explaining in clear language that PST does not apply to equipment and materials used to produce goods.
Condo industry representatives met with Naqvi and government officials last month and more meetings will be held in a bid to find some accommodation for the negative effect on condominium corporations.
"We had a very positive conversation and will continue to work with them to determine some solutions," Naqvi said. "We understand their position better and vice versa."
Conant, from his perspective, commented: "What he (Naqvi) did explain in greater detail was how you have to look at the HST as just one part of an overall proposal by the Ontario government that is both corporate tax, personal tax, the HST, a whole bunch of things."
It's in the context of these overall tax cuts and rebates, Conant says, that the government claims most Ontarians will see a tax reduction, but that won't diminish the HST tax grab at the point of purchase.