Sales taxes in Canada

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In Canada there are three types of sales taxes: provincial sales taxes, the federal GST and the HST in Atlantic Canada.

Provincial Taxes

Every province except Alberta, Newfoundland and Labrador, and two of the Maritimes has a provincial sales tax, or PST. The amount of this tax varies from province to province:

British Columbia 7% (Reduced from 7.5% Oct 2004)
Saskatchewan 7%
*The Saskatchewan side of the city of Lloydminster, which is bisected by the Alberta-Saskatchewan border, is exempt from PST by provincial law. This allows businesses on the Saskatchewan side to compete on a more equal footing with those on the Alberta side of the city.
Manitoba 7%
Ontario 8%
Quebec 7.5% nominally, but compounded upon the federal 6% GST (reduced from 7% July 1, 2006) ; therefore actually 7.95%.
Prince Edward Island 10% nominally, but compounded upon the federal 6% GST (reduced from 7% July 1, 2006); therefore actually 10.6%.

Which items the tax is applied to also varies by province. The Yukon Territory, Northwest Territories and Nunavut do not have any type of regional sales tax.

Goods and Services Tax

Under Brian Mulroney's government in the early 1990s a federal sales tax, the Goods and Services Tax (GST) was introduced to replace the hidden 13% Manufacturers' Sales Tax (MST), a tax much despised by economists. Nevertheless, the GST caused much controversy when it was implemented, but today has become a crucial source of federal revenue. The rate is 6% (reduced from 7% July 1, 2006) and it is applied to a wide variety of items, many of which are exempt from provincial taxes. In Quebec and Prince Edward Island, the PST is also applied on top of the GST. Prime Minister Stephen Harper promises to reduce the GST to 6%, and then to 5% within 5 years. In a two year budget tabled in Parliament on May 2, 2006, the Conservative government pledged to implement the first of two reductions to the GST to 6%, with an effective date of July 1, 2006. Bill C-13, which implements that measure, received Royal Assent on June 22, 2006 (2006, c.4).

Harmonized Sales Tax

When Jean Chrétien's Liberals came to power in 1993 they promised to abolish the GST. This proved impractical, however, and instead they opted to attempt to merge the GST with the PST in each province. Only three Atlantic provinces--New Brunswick, Newfoundland and Labrador, and Nova Scotia--agreed to this, however. These provinces thus have the Harmonized Sales Tax or HST, a 14% (reduced from 15% July 1, 2006) tax that replaces both the local PSTs and the GST.

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