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: New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario and Prince Edward Island. The HST is collected by the Canada Revenue Agency (CRA), 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. In provinces and territories which have not enacted the HST, the CRA collects only the 5% goods and services tax. The current rates are as follows:

The introduction of the HST changed 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.

In 1996, three of the four Atlantic provinces — New Brunswick, Newfoundland and Labrador, and Nova Scotia — entered into an agreement with the Government of Canada to implement what was initially termed the "blended sales tax" (renamed to "harmonized sales tax") which would combine the 7% federal GST with the provincial sales taxes of those provinces; as part of this project, the PST portion of the new HST in these provinces dropped from 10% to 8%. The result was a 15% combined tax when the federal GST was added. The new tax for these provinces went into effect on 1 April 1997.

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