Wall nails Saskatchewan builders with sales tax

Fiscal reality hit home in Saskatchewan last week with the release of the province’s new budget. In an acknowledgement that being overly dependent on a natural resource in decline (oil) means a choice between massive deficits for years to come or higher taxes today, Conservative Premier Brad Wall chose to raise provincial sales tax from five per cent to six per cent. More importantly, Wall simultaneously took the hammer to construction services by removing them from the list of PST exemptions. This means an immediate increase in the cost of new homes and renovations.

Six per cent PST will hurt builders and would-be home owners alike
Reaction from organizations representing the province’s construction industry were immediate and direct. “The Government of Saskatchewan’s decision to attempt to overcome a substantial deficit by introducing a budget that stifles growth, discourages professionalism, and fosters an already thriving underground construction economy that puts workers and homeowners at risk both financially and with respect to safety,” said the Saskatoon & Region Home Builders’ Association (SRHBA) in a media release.

Saskatchewan Construction Association executives and industry representatives met last week with provincial counterparts to discuss the new PST’s impact on construction

In addition to putting the brakes on continued growth in the industry, the SRHBA also suggests another group will be hurt badly. “The reality is that the addition of PST to construction services erodes the affordability of new homes in Saskatchewan and the Saskatchewan advantage.” The SRHBA says the result will be a tax burden that will be passed through in the form of  higher home mortgages to those who can afford them, while putting home ownership out of reach for those who cannot.

Fears of growth being curtailed
According the SRHBA, Saskatoon has been growing in population by three per cent each year since 2010. The association points out that the benefits of this growth to the City have been wide-spread and recognized. “Now, confusingly, they have managed to erode affordability and stifle growth virtually overnight, all in what they’ve said is actually an effort to balance the budget and grow the economy.”

Dismay was also expressed by the Saskatchewan Construction Association (SCA). “The addition of the PST onto construction labour is a tax on growth,” says SCA President & CEO Mark Cooper. “Today’s announcement will make it more difficult for the construction industry to build a more prosperous Saskatchewan for future generations.”

Fuel for the ‘underground economy’?
Concerns about the growth of the underground economy are particularly significant to the SRHBA, since the sales tax will now also be applied to home improvements and renovations. “With the cost of hiring a professional being raised as a result of the new budget, it has now become even more appealing to consumers to go for a cheaper, illegal ‘cash deal’,” says the association. “The underground market that thrives off of the cash deals that are responsible for incomplete projects, inadequate worker safety, and a lack of accountability, have now been energized. The new budget disincentivizes [sic] professionalism, and this is troubling.”

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