New sales tax hits haircuts, movies, realtor fees and fitness clubs

Thursday, July 30th, 2009

Service providers say the HST will add to customer costs at a time of falling sales

Brian Morton

Many in B.C.’s service industry fear the province’s proposed harmonized sales tax will not only increase costs for clients, but make a bleak economic climate even worse.

Expect pricier movie tickets, too.

“When it goes into effect, you’ll probably see all movie theatres raising their prices by $1 to make up the lost revenue because of the tax,” said Leonard Schein, owner of Festival Cinemas, which operates Fifth Avenue Cinemas, Ridge Theatre and Park Theatre.

Although Schein said he doesn’t think the tax will drive customers away, some may opt for less expensive tickets offered for Tuesdays or matinees. “Movie theatres are still the cheapest form of entertainment. I don’t feel attendance will drop that much.”

However, Sam Ponnayya, co-owner of Oakridge Laser & Skin Care Clinic, wasn’t so optimistic.

“Sales are going to be down, at least 20 to 30 per cent, minimum,” said Ponnayya. “Eighty per cent of our business is service, and customers say it’s an added expense for them.”

Ponnayya said the new tax was announced at a time when the slowing economy has already hurt his business. “We’re planning to hire people, but I might have to hire part-time [employees], instead of full-time. We should have gotten a bit of a warning.”

Under the harmonized tax regime, announced last week by the provincial government, the five-per-cent federal goods and services tax will be combined with the province’s seven-per-cent provincial sales tax to make a 12-per-cent harmonized tax, effective July 1, 2010.

The added costs to consumers will come from the fact the new tax will apply to the same goods and services that the GST applies to, and that includes many items that are currently exempt from PST.

Personal services affected by the new tax include hair care, dry cleaning, repair services for household appliances, household maintenance such as renovations and painting, real estate fees, membership fees for health clubs, movie and theatre tickets, funeral services, professional services such as accounting and home care, and airline fares within Canada.

Scott Russell, president of the Real Estate Board of Greater Vancouver, said that while he did not yet know the full implications of the new tax, it will result in higher costs for such real estate-related services as realtors’ fees and house inspections.

“It’s just going to be an added cost at the end of the day,” said Russell. “Typically, the seller pays the [realtor’s] commission. So there’ll be another seven per cent on top of that. On a $10,000 commission, that’s another $700.”

Russell said appraisals usually cost about $300 and home inspections between $300 and $400 — both now subject to the HST. “And in rural areas, people have septic tank inspections.

“Real estate is an important economic driver. Some consultation would be helpful.”

Steven English, a certified general accountant in North Vancouver, said the new tax won’t be great for his profession overall because it’s an extra charge and could result in some people opting to do their own accounting.

Nevertheless, he said, the tax doesn’t bring a massive increase and in the long term, “I think it will be good because it [the harmonized tax] is easier to work with once it settles down.”

English said accountants will likely have to lower their fees a bit, with clients making up the rest. “I’m going to have to start eating some of it.”

Ron Zalko, owner of Ron Zalko Fitness Centre, Gym and Personal Training in Vancouver, said that while he doesn’t believe the extra cost will drive customers away, it sets a bad precedent.

“I think all fitness providers should be exempt from the tax,” he said. “If you encourage people to [stay fit], that will take a burden off the health-care system. If you’re fit, you’re healthy and productive. And most of this generation has just quit exercising.”

Zalko said the new tax could stop some people on limited budgets from joining fitness clubs.

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