An association representing mortgage brokers promised Friday to
oppose in the "strongest possible way" Ottawa's plans to apply the
goods and services tax to their profession.
Jim Murphy, CEO of the Canadian Association of Accredited Mortgage
Professionals, told CBC News it's "still not completely clear" whether
imposing the GST would affect house prices.
Mortgage brokers are vowing to fight Ottawa's proposal to broaden application of the GST to financial services. (CBC)
In
its budget earlier this month, Ottawa served notice of plans to broaden
the application of the GST on financial services that had previously
been exempt.
The services affected include those provided by mortgage brokers, investment dealers, financial planners and insurance advisers.
Ottawa has changed the definition of taxable financial services to
include those that "facilitate" or "prepare," and which is expected to
include some commissions paid to mutual fund dealers, car dealers, and
telemarketers.
Those services were made exempt when the GST was introduced in 1991.
Murphy said his association, as well as those representing the other
professions, have provided information to Flaherty's office and to the
Canada Revenue Agency on how their members would be affected.
And each profession stands to be affected differently.
"We are all seeking clarification in terms of how it would affect our various professions," Murphy said.
Out of brokers' commissions
It
appears, he said, that in the case of mortgage brokers, the tax would
come out of the commissions now paid by banks and other lenders paid to
those brokers.
That could potentially reduce those commissions by as much as 13 per
cent in Ontario or 12 per cent in B.C., once those provinces adopt
their harmonized sales tax (HST) in July.
The lowest hit would be in Alberta — where there is no provincial
sales tax — but it would still be five per cent. Whether the broker
would be able to pass that along to the homebuyer would depend on the
degree of competition in the local market, Murphy said.
"The other option is that the mortgage broker tries to pass those
costs along to the consumer, to the borrower, and that obviously is
adding to costs," said Murphy. "That makes the mortgage broker …
uncompetitive versus other distribution channels for mortgages."
He said he was hopeful that Ottawa would not proceed with the changes.
"We're cautiously optimistic that they will listen to what the
negative consequences of such a change would be," said Murphy, "and
that they will continue with the current status quo."
