Taxing new home construction 'draconian', builders say

Saskatchewan construction companies and contractors must collect provincial sales tax onnew contracts starting April 1, 2017.

The move targets builders' labour and overhead costs. It's expected to add $345 million each year to provincial coffers.

It's one of the single largest contributors to government revenuein this year's budget.

"Do I think it might curtail some people ordering a renovation on their home, or building a new home for the time being?I acknowledgethat's a possibility," said Finance Minister Kevin Doherty.

"But if we're going to move to a more consumption-tax base those were big areas we had to look at."

Affordability will suffer, say builders

"We're hugely disappointed," said Christiane Gurette, the CEO of the Saskatoon & Region Home Builders' Association (SRHBA).

She noted Alberta and British Columbia do not charge provincial sales tax on construction jobs, and estimated this will raise the prices of new homesby at least five per cent in Saskatchewan.

• How will the PST hike hit you in the pocketbook?
• OPINION| Saskatchewan's 'austerity budget' comes too late
• Government redesigning welfare programs to get 'able-bodied' people off the dole

"It's going to have a huge impact on affordability," said Gurette.

She said imposing PST on renovation contractsmay backfire, as it may encourage more builders to take on cash-only jobs.

Tax measures targetnew homebuyers

"It's a measure that on the housing part is draconian,"said Ron Olson, the general manager of BoychukConstruction.

Olsonis thepast president of the CanadianHomebuildersAssociation, theSRHBA, and theSaskatoon Real Estate Board.

• Sask. restaurant industry bracing for '$140M' PST impact
• How much more you'll pay for alcohol and cigarettes
• Sask. budget expands and hikes sales tax to 6%

He noted in 1990, Ottawa initially promised to index its Goods and Services Tax to the price of housing, and issue rebates to new homebuyers. Olson said the price of Canadian homes has since increasedthreefold, whilerebates have not kept pace.

"The budgets are balanced on the backs of young people paying mortgages today. And that's where that money will go," Olson said.

Contractors' materials exempt from PST

With the average new home in Saskatoon and Regina selling for close to $450,000, Olsonestimatedtaxes will now raise the sticker price of that house to $478,500.

To soften the blow, contractors will be exempt from paying PST on materials starting April 1, 2017.

Saskatchewan's finance minister said when it comes to bidding for jobs, that puts Saskatchewan contractors on a more even footing with their competitors in Alberta and British Columbia.

Kevin Doherty noted the change will no longer allow contractors from out-of-province to bring in cheaper materials, then outbid local firms on the final construction cost.

• MORE SASK. BUDGET NEWS|Meewasin Valley Authority losing nearly half its provincial funding
• MORE SASK. BUDGET NEWS|Fee hikes for long-term care residents among budget health cuts
• MORE SASK. BUDGET NEWS|Sask. government decides not to amalgamate school divisions
• MORE SASK. BUDGET NEWS|Province will manage and operate Wascana Centre
• MORE SASK. BUDGET NEWS|Government hopes to save $30.1 million by reducing post-secondary funding
• MORE SASK. BUDGET NEWS|Province will stop paying for funeral services for social assistance clients
• MORE SASK. BUDGET NEWS |'It's going to be quite a nightmare': Passengers outraged by STC closure
• MORE SASK. BUDGET NEWS|Ministry of Agriculture will end Saskatchewan Pastures Program