Fact: It snows in Canada.
Fact: Snow plowing services were not subject to Ontario retail sales tax and are now subject to HST at the rate of 13% (previously snow plowing services were subject to 5% GST).
Fact: Prior to July 1, 2010, municipalities received a 100% rebate of GST paid on outsourced snow plowing services.
Fact: After June 1, 2010, municipalities must pay HST (13%) and receive a 100% rebate of the GST portion and only 78% rebate of the HST/PVAT portion.
This means that 1.76% is not recoverable. This means that HST has resulted in increased costs to municipalities for snow removal. Depending on a municipalities snow removal budget and use of 3rd party contractors, the cost could exceed $1 Million per season.
Environment Canada is telling us that snow removal services are going to be needed today and tomorrow. My opinion is that the winter of 2010/2011 will the politicians a lesson that snow removal services should be zero-rated as they are necessary in Ontario. Alternatively, municipalities need a 100% MUSH sector rebate on the PVAT portion.
I always get often angry emails from people when I raise areas where the GST/HST regime can be improved. Guess I should expect some emails regarding this post.