The impact of the HST on Ontario's cultural sector: is there time to influence its implementation?

Last week, The Arts Advocate Report hosted a Policy Dialogue for subscribers on Ontario’s proposed Harmonized Sales Tax.  The subject of much political debate both federally and provincially, the actual reality of what this will mean for Ontario’s cultural sector is just starting to dawn.  It’s clear that there will be significant revenue implications, at least for the medium term.  The impact of these on Ontario’s cultural sector is not widely understood in many circles including government.  Adding to this is the complexity of Ontario’s cultural sector, making it difficult to generalize, or fit in a specific box.

The evidence presented by Ontario Finance Minister Dwight Duncan’s staff makes it clear that the new tax regime will benefit lower and middle class Ontarians, while resulting in a small increase for higher income earners.  Recognizing the relatively low incomes of Ontario’s artists and cultural workers, the proposed HST should be welcome. 

For producers, institutions and the many small businesses and self-employed individuals though, the implementation and roll out of the HST poses challenges.  There is real concern that there will be revenue erosion (or financial cost) as many fear that consumers will not accept an 8% increase in ticket prices, gallery admissions or subscriptions, at least in the medium term.  For a sector that operates on the edge of financial solvency, with little price elasticity in this current economic environment, this signals problems. 

It could also mean that much of the recent Ontario government investment in cultural agencies like the Ontario Arts Council and the Ontario Media Development Corporation could be negated as cultural organizations grapple with how to deal with anticipated revenue loss,   a reality that has not been considered.

The window for the cultural sector to have any influence on the implementation of the HST is small.  While the introduction of the new harmonized tax regime is largely a foregone conclusion, there is still time for the cultural sector to put forward recommendations to ease any potentially difficult impacts of its implementation.