Those pricey home renovations are about to get a little more expensive and that stands to negatively impact Saskatchewan’s construction sector along with those paying for the work.
Starting April 1, the provincial sales tax (PST) will be expanded to construction services. After some initial confusion within the industry as to what that meant exactly, the province has clarified that it won’t be a full six per cent applied to contracts.
Under the current system, PST is applied to building materials that go into a construction project. The expansion of the PST will now be applied to labour as well. The province explained a typical contract would amount to 40 per cent materials and 60 per cent labour. That means, instead of a full six per cent, many contracts will see a rise of about 2.5 per cent.
In addition, the tax will not be applied to the lot, only the unit itself.
While the owners won’t pay as much as first thought, the extra costs will mean things like renovations to homes or businesses, even new builds, could amount to thousands of extra dollars in many instances.
The move is coming at an unfortunate time for Ben Stadnyk, owner of Budget Builders, which specialize in installing and repairing doors and windows.
“We’re really trying hard right now, not just me, everyone else in the construction industry is really putting their nose to the grindstone and trying to turn some profits and try to keep the doors open,” he said.
His company is what he refers to as a small, family-run business, saying within the last six months he’s been forced to downsize about 30 per cent of his overhead.
He called the PST expansion to his industry “discouraging” and anticipates costs for consumers to jump up significantly while expecting his own sales to drop.
The provincial government said contractors will soon be eligible to acquire tax-free building materials for use in fulfilling a contract.
This simplification of PST rules improves cash flow, argued the province.
The Saskatchewan Construction Association’s John Lax disagrees.
He said the changes will mean a builder won’t have to pay PST on materials, unlike the current system. Lax said that’s what the province means when it talks about improved cash flow, which he said won’t matter since it’ll be harder to get a contract to build anything since costs will have gone up on nearly every construction project.
He said if an individual or company wants to build a new restaurant, mall or theatre in Saskatchewan, they might reconsider with this new tax and choose to build elsewhere instead.
“It makes us as a province less competitive. We’re the only province in western Canada that has this tax,” said Lax, calling it a tax on growth.
Growth is something Stadnyk would like to see in his business, but the tax is leaving his future uncertain.
“When you see another tax implemented on top of an already crushed economy it really beats a guy down. I’m getting pretty tired of working this hard and not getting anywhere.”