Harmonized Sales Tax

The Harmonized Sales Tax (HST) is a consumption tax in Canada. It is used in provinces where both the federal Goods and Services Tax (GST) and the regional Provincial Sales Tax (PST) have been combined into a single value added sales tax.

The HST is in effect in five of the ten Canadian provinces: Ontario, New Brunswick, Newfoundland and Labrador, British Columbia and Nova Scotia. However, beginning on April 1, 2013, British Columbia will be abandoning the HST and reverting to the old GST/PST system and Prince Edward Island will be adopting the HST. The HST is collected by the Canada Revenue Agency, which remits the appropriate amounts to the participating provinces. The HST may differ across these five provinces, as each province will set its own PST rates within the HST.

The introduction of the HST changes the PST for these provinces from a cascading tax system, which has been abandoned by most economies throughout the world, to a value added tax like the GST.

To help maintain revenue neutrality of total taxes on individuals, the Canadian government (for the GST) and the participating provincial governments have accompanied the change from a cascading tax to a value-add tax with a reduction in income taxes, and instituted direct transfer payments (refundable tax credits) to lower-income groups. The federal government provides a refundable "GST Credit" of up to $248 per adult and $130 per child to low income people for 2009-10. Provinces offer similar adjustments, such as Newfoundland and Labrador providing a refundable tax credit of up to $40 per adult and $60 for each child. British Columbia’s low income credit is mailed out to 1.1 million British Columbians every three months and amounts to up to $230 annually per individual.

Despite the benefits advocated by those in favour of moving from a cascading tax to a value added tax, in some places it has shown to be unpopular with the general public, as shown in the British Columbia sales tax referendum, 2011 which ultimately decided that the HST should be reverted back to the GST/PST system.