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Wednesday
Feb102010

Builders rap possible sales tax hike 

Increasing the sales tax would hammer Nova Scotia homebuilders, says the association that represents more than 300 firms.

According to Finance Minister Graham Steele, a consensus has been emerging at a series of pre-budget meetings that people will accept a higher harmonized sales tax. He is touring the province looking for suggestions to offset what’s predicted to be a $1.4-billion deficit by 2013.

A two per cent hike in the sales tax would add $6,000 to the price of a $300,000 home, Paul Pettipas, chief executive officer of the Nova Scotia Home Builders’ Association, said Tuesday.

"That’s substantial," Mr. Pettipas said. "Unless that was mitigated in some way, that would affect our industry."

It is tough to know exactly what the impact would be, he said.

"We just came off a year where, because of the economy, we were down 20 per cent," Mr. Pettipas said. "We can’t afford to go down any more."

The premier’s economic advisory panel recommended last fall that Nova Scotia hike its portion of the sales tax by two percentage points. New Democrats say that would generate about $345 million.

But Mr. Pettipas argued that the economy "is still in an incredibly fragile state."

A sales tax increase would reduce housing starts, he said.

"The price tag of the house is going up and that’s the problem," Mr. Pettipas said.

A lot of people are "very close" when it comes to qualifying for a mortgage, he said.

"There’s not a lot of money floating around," Mr. Pettipas said.

As the price of housing increases, "more and more people are just not in that approval range of getting a mortgage to buy that house," he said.

"So if you move the price up, you just take more people out of the equation."

If it the sales tax absolutely must be increased, Mr. Pettipas suggested it be done over a four-year period in 0.5 per cent increments.

"Then it allows people to sort of start to live with this and it’s not going to have that huge effect on housing," he said.

Mr. Pettipas said on a $300,000 home, $1,500 in new tax is a lot easier to stomach than $6,000.
( clambie@herald.ca)

‘We just came off a year where . . . we were down 20 per cent. We can’t afford to go down any more.’
PAUL PETTIPASHome Builders association

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