One of the ironies of harmonization is the outcry from the mutual fund industry that a HST will be an additional strain on the savings of ordinary investors. CI Financial Corp. even issued a news release on the topic:
Harmonization of Ontario’s sales tax with the federal GST would lead to a massive tax on the savings of ordinary citizens, notes CI Financial Corp., which manages or administers approximately $75 billion on behalf of Canadian investors.
“A harmonized sales tax could drain over half a billion dollars a year from the investment accounts of Ontario residents,” said Stephen A. MacPhail, CI President. “Ontarians need to be aware of all of the implications of harmonizing the GST and the provincial sales tax. We urge the provincial government to avoid any new tax on savings, especially under the guise of a consumption tax.”
There is no doubt that harmonization will cost investors and it is legitimate to question if savings should be taxed. What is ironic, though, is the fund industry suddenly getting the religion on expenses and shedding crocodile tears on the plight of average investors. The average Canadian mutual fund costs investors about 2.5% per year in expenses; the HST will add 20 basis points to it. Is the MER or the HST a bigger burden on investors? How many investors in the iShares CDN LargeCap 60 (XIU) or the TD e-Series mutual funds are losing sleep over the couple of extra basis points they now have to shell out? Did the same fund industry pass along the savings to investors when the Federal Government cut the GST from 7 percent to 5 percent?