What is a value-added tax?
Previously, the PST was paid by most businesses on various costs throughout the supply chain. In other words, though you may not have realized it, the PST was charged multiple times on various costs before a product reaches the store. That embedded, hidden tax drove up costs to consumers and was a big competitive disadvantage to Ontario’s businesses. More than 140 countries – countries we compete with for investment and jobs – don’t have that disadvantage. Under the HST, most taxes paid on business inputs are refunded to the businesses through input tax credits, generating savings from removing the former embedded PST – savings that can be passed along to consumers. For example, when Newfoundland and Labrador, Nova Scotia and New Brunswick harmonized their sales tax with the federal GST, cost savings were passed through to the consumer. The same is expected to happen in Ontario, leading to lower prices for some products.
