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HST rebate means no additional tax on homes under $525,000

After weeks of hot political debate, public protest and industry lobbying, a crack appeared Thursday in the provincial government's implementation of the hugely unpopular harmonized sales tax with a change in how it will apply to new housing.

"We heard the concerns from consumers and industry," Finance Minister Colin Hansen said, announcing that the government will raise the threshold for its maximum HST rebate on new homes to $525,000 from $400,000, effectively increasing the rebate by 30 per cent.

For homes priced under $525,000, the rebate will ensure there is no additional tax burden from the HST. Purchasers of homes over the new threshold will pay the seven-per-cent HST and be eligible for a maximum rebate of $26,250.

The Liberal government also grandfathered implementation of the tax on new housing. If buyers signed purchase contracts for new homes, but do not take possession before the HST's July 1, 2010, implementation, the HST will not apply.

The province still has to push through enabling legislation for the HST in the face of an NDP opposition calling for it to be scrapped and a public highly dissatisfied with the tax.

Business and housing industry groups welcomed the threshold increase, but with some qualifications.

John Winter, president of the B.C. Chamber of Commerce, characterized the change as "an encouraging demonstration that the provincial government is hearing industry's concerns and acting on them."

"I think the province deserves a pat on the back," Neil Chrystal, president of the Urban Development Institute's Pacific division, said in an interview. "Raising the threshold makes a lot of sense and was the right thing to do."

The industry had lobbied intensely, arguing that the tax, combining the provincial sales tax with the federal goods and service tax, would crimp sales and throw an undue burden on new-home buyers, particularly in the Lower Mainland where the average prices for even more modest home types topped the previous $400,000 threshold.

"The [HST] was a big concern and it remains a big concern," Chrystal said. "In 2009, we'll probably see the second-lowest year for housing starts since 1962. Is this the time to be adding costs to the industry?"

Chrystal noted that the threshold won't aid most buyers of single-family homes and luxury condominiums.

The change did little to diminish political opposition to the HST, with the NDP and grassroots opponents vowing to continue efforts to overturn the tax, which will add to the cost of many previously untaxed goods and services.

"This is cosmetic surgery on a bad tax," Bruce Ralston, the NDP finance critic, said in an interview. "It's certainly not what the industry asked for and I don't think it's going to do much."

The MLA for Surrey-Whalley said the NDP maintains its position that "the solution is not to do these one-off deals. Our firm position is that this tax should be dropped."

Bill Vander Zalm, former Social Credit premier and now an anti-HST crusader, said Hansen's shift was a "good beginning," but the grassroots movement he leads still plans to proceed with its campaign to launch a province-wide petition and force a referendum on the tax.

Hansen announced the HST change for housing two days after the Manitoba government said it would not implement sales-tax harmonization, which it estimated would load $400 million a year in additional costs onto consumers, because it would "be the wrong signal to send" during an economic downturn.

In Toronto, a raucous opposition protest Thursday over Ontario's HST enabling legislation resulted in three Conservative MPPs being ejected from the legislature for pillorying Premier Dalton McGuinty and Finance Minister Dwight Duncan with unparliamentary language.

Peter Shurman, one of the rebellious MPPs, said that "if that's the only way you can get attention when you know that your constituents are demanding public hearings, then that's what you do."

With files from Canwest News Service