The National Post reported this story today on the McGuinty government’s plan to introduce the Harmonized Sales Tax (HST) to Ontario.

According to the story, this tax initiative is aimed to reduce the cost of doing business in Ontario.

At the present time, many retail businesses are required keep separate records on the Provincial Sales Tax (PST)and the Goods and Services Tax (GST). The government claims that, in harmonizing the PST and the GST, business owners will be less burdened with administrative duties in record-keeping.

This is a problem for lawyers. At the moment, lawyers with gross revenue over $30,000 are required to collect the GST on behalf of the Canada Revenue Agency (CRA). But legal services and disbursements are not subject to the PST.

Currently, lawyers often waive the GST charge on walk-in services, such as notarization and summary advice. They accordingly absorb the 5% GST themselves as a cost of doing business.

If the HST becomes reality, it will be applicable to legal services. The client will face a steep tax-hike on legal services, paying the HST of 13%. Given the approximate 8% increase in tax, lawyers will be less inclined to absorb the tax themselves and may pass the cost onto the clients.

In the 21st century, when most transactions are computerized, it’s hard to believe that the harmonizing of the PST and the GST will bring much relief to a business owner’s administrative burden regarding to tax-collection. Rather, I suspect that the anticipated introduction of HST is rather an attempt to raise tax revenue from many currently PST-exempt goods and services, such as the legal services I provide.