Nova Scotia to Reduce HST Rate by 1% in 2025: Tax Relief for Residents and Businesses

In late October, Nova Scotia announced its intention to reduce the provincial portion of the Harmonized Sales Tax (HST) by 1% in 2025, resulting in a new combined HST rate.

This decision reduces the financial burdens on the citizens of this Canadian province. It is one of the largest tax breaks in Nova Scotia and the first change in sales tax in 14 years.

The Impact of the Reduction of HST Rate

The Canadian HST combines federal and provincial taxes on goods and services in several Canadian provinces, including Nova Scotia. Currently, the HST in Nova Scotia is 15%, a combination of the federal HST of 5% and provincial HST of 10%.

With the decision to reduce the provincial HST by 1% from April 2025, the provincial rate will be 9%, and in combination with the federal rate, the HST in Nova Scotia will be 14%.  Although this decision should help ease the cost of living for Nova Scotia's citizens, it will also reduce provincial revenues between CAD 260.8 million in the fiscal year 2025-26 and CAD 272.4 million in the fiscal year 2027-28. 

The last change in the HST rate occurred in 2010 when the provincial HST rate increased from 8% to 10%. Thus, this is the first decrease in the HST rate.

Conclusion

The HST is the second largest generator of provincial revenue, behind the personal income tax. Therefore, the decision to reduce this rate is significant. Whether other provinces with the HST, such as Newfoundland and Labrador, New Brunswick, Prince Edward Island, and Ontario, will follow Nova Scotia's lead remains to be seen.

With the upcoming electronic in 2025 and the opposition proposal to reduce the HST to 13%, it should not exclude an option that further reduction in the HST rate could occur in 2025 or 2026.

Source: Nova Scotia - Press Release, EY