How the HST hit Alberta

Harmonized sales tax was one of the big political stories of 2010, causing angry murmurs in Ontario and leading to the political suicide of B.C.’s premier and opposition leader. One happy place, however, was spared the storm: Alberta doesn’t have a provincial sales tax (yet). When it comes to taxation, the number zero harmonizes with everything.

Late in the year, however, Alberta Finance Minister Ted Morton went public with concerns he had tried, and largely failed, to bring to the attention of his Ottawa analogue, Jim Flaherty. The HST applies to financial services, and while a few mutual funds are creating distinct HST-free products for non-harmonized markets, most are taking advantage of a rule that allows them to charge one “blended” rate to everybody regardless of domicile. In essence, Albertans who have climbed into investment pools with Ontarians are now covering part of those Ontarians’ provincial tax bill.

Morton wonders why financial services should be subject to HST at all. The whole point of the HST is to tax consumption efficiently and transparently, sparing savings and investment. Taxing the provision of investment advice and letting provincial rates be “blended” does seem to contradict this goal on all counts.