The Ontario government’s harmonized sales tax is meant to make business easier and goods cheaper, but local artists are worried the HST will affect sales of artwork and theatre tickets.
“The HST will increase the costs of being an artist in Ontario,” Paul Dewar, MP for Ottawa Centre wrote in an e-mail.
“And it will decrease the purchasing ability of consumers and arts patrons. We need a progressive tax measure that support arts appreciation. The HST will do the opposite.”
Under the tax scheme, the federal Goods and Services Tax and the provincial sales tax would be harmonized into a single 13-per cent-tax.
Some goods and services, such as gasoline and hair cuts, which were previously subject only to five per cent GST will be subject to the new HST.
That means tickets to a play or a concert at a local theatre (defined as one with less than 3,200 seats) would cost eight per cent more.
“It’s a good news, bad news story,” says Katherine Carleton, the executive director of Orchestras Canada, which advocates on behalf of music groups.
Carleton says ticket sales may be affected as consumers adjust to paying more tax on admission.
Steve Martin, the owner of the Gladstone Theatre, says he plans to keep ticket prices at $35, and absorb the cost of the tax instead.
But for non-profit theatres like the Great Canadian Theatre Company, absorbing the HST is not an option.
“It’s a big concern,” says Nancy Oakley, the company’s general manager.
The cost of renting gallery and art studio space will also be subject to the 13 per cent tax.
Under the current tax system, rent is subject only to five per cent GST.
“In many cases, the artists are just going to swallow the [additional] costs,” says Don Monet, owner of Cube Gallery in Ottawa’s west end.
But Monet adds that the HST presents some benefits to working artists. On their tax returns they can deduct the full 13 per cent tax paid on art supplies, instead of just the GST.
“The PST [is] a cost to them,” Monet says. With HST, Monet says, artists can deduct the full cost of the tax.
Yasir Naqvi, the Liberal MPP for Ottawa Centre, says even though tickets or art may cost a little more, the HST scheme does include incentives for non-profits and small businesses, including artists, many of whom are registered as small businesses.
Since many theatre, dance and music companies are registered non-profit groups, they will now be eligible for rebates on the HST they pay on their inputs and supplies, Naqvi says. This would lower their operating costs.
“From an operations point of view, it gives them more money,” Naqvi says.
Ian Lee, an expert in business policy at the Sprott School of Business at Carleton University says even though smaller arts groups will have to make adjustments, in the long run, the HST will reduce the cost of doing business.
“The HST is a much more efficient tax and it’s a more equitable tax,” says Lee.
He says we can learn from the reactions to the GST when it was introduced in 1991. Sales in some industries did go down for a few months after the GST was phased in, he says, citing the example of car sales.
“There’s a short-term effect. But then when you go back and look at the data six months, 12 months later, its comes back up to where it was before.”
The bill that would implement the HST is still before the provincial parliament.
The HST will be phased in starting next July. Both the Ontario Progressive Conservatives and the provincial NDP oppose the new tax.
Orchestras Canada has helped develop an impact assessment tool that arts groups – not just orchestras – can use to predict how the HST will affect them, and what they can do to take advantage of the rebates, which Carleton says are “pretty generous.”
Carleton says artists will require significant training to understand the HST if it is phased in, and those companies who rely on volunteer accountants may not have the expertise to make full use of the tax incentives.
“If there are benefits, they will be long term,” Carleton says.