Harmonizing the GST and PST

[jdobbin]

Such businesses are freeloaders that have not being paying their fair share.

That is a ridiculous argument.

There have always been exceptions to sales tax and it isn't about freeloading.

[Nat]

If you believe that you are no longer going to be audited, or that someone is no longer going to be audited, you are seriously mistaken.

I didn't say I didn't expect to be audited but it won't take a week and there will be nothing to argue about as the HST is straightforward compared to the PST.

[ToadBrother]

If you believe that you are no longer going to be audited, or that someone is no longer going to be audited, you are seriously mistaken.

No, but the HST, I'm assuming, will be following the GST rules, which while by no means without its wrinkles, is a significantly easier tax to administrate and audit.

[ToadBrother]

Such businesses are freeloaders that have not being paying their fair share.

Huh? Whatever you think of the PST, it's the Province that decides what gets charged. The government long ago made the choice that services like labour were PST exempt (the PST was seen as a purely goods tax, not a goods and services tax). I have no idea why you would say something so clearly false.

[Riverwind]

There have always been exceptions to sales tax and it isn't about freeloading.

It does not make a difference why some businesses were granted special consideration. The fact is some businesses enjoyed benefits that other businesses did not receive. This meant the tax burden on other businesses had to be higher to compensate. If the government wants to remove their exemption and they respond by insisting they are entitled to special treatment then they fit the definition of freeloader.

[Riverwind]

Huh? Whatever you think of the PST, it's the Province that decides what gets charged. The government long ago made the choice that services like labour were PST exempt (the PST was seen as a purely goods tax, not a goods and services tax). I have no idea why you would say something so clearly false.

Let's say the government had a law that granted tax exemptions to people working in the movie industry (just an example). Let's say the government took away those exemptions and the people who benefited started screaming about how they were entitled to special treatment. They would be freeloaders then. If the simply accepted the change as fair then I would not describe them as freeloaders.

[ToadBrother]

Let's say the government had a law that granted tax exemptions to people working in the movie industry (just an example). Let's say the government took away those exemptions and the people who benefited started screaming about how they were entitled to special treatment. They would be freeloaders then. If the simply accepted the change as fair then I would not describe them as freeloaders.

I don't see why a business would be freeloading if they contested government actions that caused their costs to go up. I personally think it's shortsighted, and that businesses should be lauding the death of the PST, but I don't see it as freeloading to complain when your tax status changes. Heck, I complain when my taxes go up.

[msj]

Finally starting to see some balanced articles/commentary about HST in the papers.

A bit rich: The fundco case for HST exemption

My favourite quotes:

At the heart of the fund industry's lobbying effort is one of the simplest concepts in personal finance: the magic of compound interest. Take the example of a 45-year-old investor who puts $20,000 into a mutual fund in an RRSP. This hypothetical fund comes with very high fees (2.75 per cent) but nevertheless churns out some excellent gains; by the time the investor is 85, he has a nifty nest egg of about $835,500.

Here's the punchline: If not for the provincial government imposing its dastardly HST, that number would be $70,000 higher. “We would hope that the government would not want to take 350 per cent of your initial investment if they truly understood the consequence of this tax,” writes Patrick Farmer, chief executive officer of EdgePoint Wealth Management and the author of this example.

Well, when you put it that way, of course not. A 350 per cent tax? Ridiculous! Man the barricades and begin the revolt! But the fund industry might want to think twice before it spends too much energy advancing this particular argument – because the same math that applies to a little bit of sales tax applies on a much larger scale to mutual fund fees.

Let's use EdgePoint's case study of the middle-aged investor with $20,000. Doesn't a 2.75 per cent fee seem a bit much for a plain-vanilla mutual fund – even a good one? Two per cent ought to be enough to pay for the managers, their travel expenses and all the other costs of running money, with a healthy profit margin. That extra 0.75 per cent in fees, compounded over four decades, amounts to $282,713 in lost wealth – or 1,314 per cent of the original investment.

and:

The real question is why an investment manager's services ought to be tax-exempt, when a lawyer's or accountant's or barber's services are not.

and:

The presence now of so many cheaper alternatives – hundreds of exchange-traded funds – will make conventional mutual funds more difficult to sell than ever. So difficult that, without an exemption, some fund companies will be forced to eat the new HST, rather than pass it on to investors. Is that what's really bugging them?

[Mr.Canada]

Toronto will never learn. First you guys have a buffoon for a mayor who sells out to the unions and wastes your money constantly and now you have a Liberal premier who seems to forget what he promised during the election campaign and does whatever he wants.

[msj]

Toronto will never learn. First you guys have a buffoon for a mayor who sells out to the unions and wastes your money constantly and now you have a Liberal premier who seems to forget what he promised during the election campaign and does whatever he wants.

Yes, Harper has managed to get through this unscathed:

Harper so far unscathed by HST blowback

Stephen Harper's fingerprints are all over changes that will mean increased sales taxes on about one in five consumer purchases in British Columbia and Ontario starting next July.

But while voter anger over the impact of the harmonized sales tax has scorched B.C. Premier Gordon Campbell – and singed Ontario counterpart Dalton McGuinty – Mr. Harper's federal Conservatives have so far escaped political blowback.

It's a remarkable feat given that the Prime Minister's government counselled B.C. and Ontario to embrace harmonization and then bankrolled its adoption. Ottawa is paying B.C. $1.6-billion and Ontario $4.3-billion in compensation to ease the transition.

Economists say Ottawa's cash was crucial to persuading Mr. Campbell and Mr. McGuinty to adopt the HST, which merges the federal GST and provincial sales tax into a single levy that applies to the same goods and services. The compensation helps provinces cope with an expected revenue dip in the short term under the new regime.

“I doubt harmonization would have proceeded at this time without the federal support,” said Toronto Dominion Bank chief economist Don Drummond, who helped persuade Ontario to make the shift.

The funny thing is this:

Mulroney brought in good policy (the GST) and paid a price.

It looks like the provincial Liberals will pay at least some kind of price for bringing in a good policy.

Harper gets away with it.

Good politics on his part and it does bring in a good policy.

I just hope that it does not usher in a wave of NDP in BC.

[Mr.Canada]

Yes, Harper has managed to get through this unscathed:

Harper so far unscathed by HST blowback

The funny thing is this:

Mulroney brought in good policy (the GST) and paid a price.

It looks like the provincial Liberals will pay at least some kind of price for bringing in a good policy.

Harper gets away with it.

Good politics on his part and it does bring in a good policy.

I just hope that it does not usher in a wave of NDP in BC.

No way. The Tories are on the rise my man not on the downward spiral like the Liberals and NDP. We all need to rally around our brave PM in these trying times and really support him and his party, The Tories. Our government, our leader, one strong PM.

No other leader is as strong as PM Harper is at this moment. He is just out classing Ignatieff everyday. Ignatieff just have the experience to run with the big dogs.

Layton is his own worst enemy and shoots himself in the foot all the time. If he wasn't so self-centred and media hungry he'd be done as leader long ago.

[msj]

No way. The Tories are on the rise my man not on the downward spiral like the Liberals and NDP.

I never said they were.

Even the article didn't say so.

Although things could change as we get closer to July 1.

We all need to rally around our brave PM in these trying times and really support him and his party, The Tories. Our government, our leader, one strong PM.

Yes, heil Harper!

Must get a portraiture of him up on every town hall in every town in Canada!

Edited October 3, 2009 by msj

[Mr.Canada]

I never said they were.

Even the article didn't say so.

Although things could change as we get closer to July 1.

Yes, heil Harper!

Must get a portraiture of him up on every town hall in every town in Canada!

I have a portrait of PM Harper on my bedside table so that he is the first thing I see when I wake up and the last thing I think of before going to sleep.

The election is going to be before July 1,2009. It will be in late April-early May. Count on it. For now he is the best commodity we have. He is head and shoulders above the other leaders. The polls prove that. Ignatieff and Layton have rating s of 15% each while Harper is more than double that.

The real problem is that Dalton McGuinty wanted to bring in this HST not the Federal Government. Talk to the Provincial Liberals if you have a problem.

I like how the NDP are opposing this tax. I don't believe that I've ever seen them being pro tax cuts before. Are they trying to be Tories? Jack Layton is in favor of not having the HST yet voted against dropping the GST by 1% twice.

I don't understand. Now you msj are saying that the HST is a good thing, yet your leader Jack Layton opposes it. Are you disobeying your leader?

Edited October 3, 2009 by Mr.Canada

[msj]

I have a portrait of PM Harper on my bedside table so that he is the first thing I see when I wake up and the last thing I think of before going to sleep.

The election is going to be before July 1,2009.

The real problem is that Dalton McGuinty wanted to bring in this HST not the Federal Government. Talk to the Provincial Liberals if you have a problem.

I like how the NDP are opposing this tax. I don't believe that I've ever seen them being pro tax cuts before. Are they trying to be Tories? Jack Layton is in favor of not having the HST yet voted against dropping the GST by 1% twice.

I don't understand. Now you msj are saying that the HST is a good thing, yet your leader Jack Layton opposes it. Are you disobeying your leader?

Interesting.

1) We are talking about July 1, 2010 since we are already past July 1, 2009.

2) The Federal government is shoveling billions of "transitional dollars" to BC and Ontario.

Without those billions it is highly doubtful that either province would be making the right decision to switch to the HST.

3) I don't really care what Layton says since I have never voted NDP and likely never will.

4) I have always stated that the GST/HST is a good thing.

5) You don't know a damned thing about me other then I don't go to bed looking fondly on pictures of Harper before "going to sleep."

[Mr.Canada]

msj. Yeah 2010 is what I meant ty. Less taxes and less spending is always better then more taxes and more spending. That's the Liberal way tax and spend where as the Conservatives are supposed to cut taxes and scale back spending by cutting useless and wasteful programs. I want less government control over my life and want to spend my money how I see fit not spend my money on people who are too lazy to work for a living.

I just see the HST as a money grab yet again so that the provincial Liberals can use my money for more programs that I won't use.

[ToadBrother]

msj. Yeah 2010 is what I meant ty. Less taxes and less spending is always better then more taxes and more spending. That's the Liberal way tax and spend where as the Conservatives are supposed to cut taxes and scale back spending by cutting useless and wasteful programs. I want less government control over my life and want to spend my money how I see fit not spend my money on people who are too lazy to work for a living.

Yes, because that's all taxes ever go to.

I just see the HST as a money grab yet again so that the provincial Liberals can use my money for more programs that I won't use.

I'm assuming you're talking about Ontario. Here in BC, while I think the way it was brought in was dishonest, I think at the end of the day businesses will be glad to get rid of our PST. I can't speak for anywhere else, but BC's PST tax is an awful horrible nightmare (and it used to be a lot worse). Harmonization is going to mean tax increases, but it's also ultimately going to mean a tax cheaper to deal with it. What I wish is that they'd make the HST 20% or 30% and start slashing down income and corporate taxes in kind. Imagine a tax that encourages saving, that is ultimately less of a drag on an economy in hard times, and far more fair.

[Chuck U. Farlie]

Just found this letter to the editor in an online newspaper... apparently not all businesses think making administration somewhat easier is enough to justify the extra cost.

This is from the president of a realty company in Stratford, Ontario, found at: http://stratfordbeaconherald.com/ArticleDi....aspx?e=1767951

HST threatens affordability of home ownership

Starting July 1, 2010, Ontarians can expect to pay a harmonized sales tax (HST) rate of 13% on a long list of goods and services that were previously exempt from the 8% provincial sales tax (PST). While the impact of the tax will be felt by all Ontarians, the province's three million homeowners and the thousands who buy and sell a home every year will be hit particularly hard by this latest tax grab.

As real estate professionals, realtors know how important the dream of homeownership is to Ontario families. Unfortunately, thanks to the forthcoming HST, that dream is going to become much more expensive. After July 1, 2010, every residential real estate transaction in Ontario will face a significant tax increase. Specifically, home buyers and sellers can expect to pay 8% more on legal fees, appraisals, real estate commissions, condo fees, home inspection fees, moving costs and the provincial government's recently introduced system of mandatory home energy audits. According to the Ontario Real Estate Association (OREA) Ontarians will pay, on average, an additional $1,449 in new taxes on their next residential real estate transaction.

If the new taxes on real estate transactions are not bad enough, HST will add 8% more tax on a series of home related costs. Specifically, HST will add hundreds, potentially thousands of dollars in additional tax on utility bills, such as gas, electricity and home heating fuel, on home renovation labour, the cost of lawn upkeep or landscaping and the cost of snow removal.

Moreover, HST will increase the cost of living with 8% more tax on gasoline, personal and professional services, meals under $4, dry cleaning, cab fares, magazine subscriptions, plane tickets, vitamins and cellphone charges.

When added together, the impact of HST on Ontario family's disposable income will be considerable. In short, HST will reduce the people of Ontario's quality of life by taking more of their hard-earned money to fund government initiatives.

While the Government of Ontario plans to compensate homeowners by offering sales tax transition cheques and modest income tax reductions, these measures will in no way offset this new tax.

A onetime payment of $1,000 (for a family of four) and a modest $368 reduction in income taxes will do very little to offset the burden of an 8% tax increase on a litany of items in perpetuity.

Help our profession oppose this latest tax grab. Write to your MPP and tell them that Ontarians do not need higher taxes on homeownership.

Barb Hiller-Thibeault, president Royal LePage Hiller Realty

Stratford

[msj]

Of course realtors don't like the HST.

Now they have to charge another 7 or 8% on their commissions.

The same reason that restaurants and barbers and spa owners don't like the change - no one likes charging their customers more money when the government is the beneficiary.

But then, why is it okay for a lawyer, accountant, or computer tech to charge sales tax but not for a realtor?

In fact, why do so many accept sales tax on goods but get upset when they are charged it on services?

I'm with Riverwind on this one - those businesses trying to get their special interests exempt from GST (or worse yet - zero rated) are freeloaders.

They want other people to pay taxes that may effect those other peoples sales while they get a free ride.

[Chuck U. Farlie]

Of course realtors don't like the HST.

Now they have to charge another 7 or 8% on their commissions.

The same reason that restaurants and barbers and spa owners don't like the change - no one likes charging their customers more money when the government is the beneficiary.

But then, why is it okay for a lawyer, accountant, or computer tech to charge sales tax but not for a realtor?

In fact, why do so many accept sales tax on goods but get upset when they are charged it on services?

I'm with Riverwind on this one - those businesses trying to get their special interests exempt from GST (or worse yet - zero rated) are freeloaders.

They want other people to pay taxes that may effect those other peoples sales while they get a free ride.

You may like it, but I think it is quite obvious that this additional tax is really going to hurt the lower-middle class and under... which consumption taxes often do.

My personal reaction will be: In the spring I will sell my condo. I will move into an unregistered apartment in someone's house, and I will buy as little as possible that has tax on it - any goods that are not food will be from flea markets, Chinese shops (the sort of black market ones that don't charge tax), ebay, and kijiji. I will use the company that I have registered, but has no income, to setup a HST number and will claim as much HST back that I possibly can.

I am extremely pissed off at this new tax grab and will do every thing I can to avoid paying any more tax to these crooks. McGuinty is going to succeed in driving Ontario back into a recession while ripping off the thousands of people who have lost their jobs or had their hours cut back.

[Nat]

My personal reaction will be: In the spring I will sell my condo. I will move into an unregistered apartment in someone's house, and I will buy as little as possible that has tax on it - any goods that are not food will be from flea markets, Chinese shops (the sort of black market ones that don't charge tax), ebay, and kijiji. I will use the company that I have registered, but has no income, to setup a HST number and will claim as much HST back that I possibly can.

I want to be the fly on the wall at your first audit!

[madmax]

What I wish is that they'd make the HST 20% or 30% and start slashing down income and corporate taxes in kind. Imagine a tax that encourages saving, that is ultimately less of a drag on an economy in hard times, and far more fair.

People could afford a monthly increase of 20% to 30% on their heating and hydro bills, and their Gas Bills?

I'm certain at that rate, they'd be broke and unable to pay their bills.

Corporate Taxes in Canada are some of the lowest in the G8. It hasn't kept industry of jobs here. And Banks/Insurance companies don't need more Billions in profit and handouts.

And if you create a consumption tax, designed to reduce consumption, you are ultimately defeating the purpose of stimulating an economy and/or raising revenue for Provincial Programs like Health Care. IMHO

Now, for some reducing consumption is a good thing. However the argument is that those who consume the most, can consume even more because of the reduction in income taxes, and those who cannot afford to consume alot, will be in a weaker position to consume the necessities of life.

However, I think you are looking at some kind of European model, and that model cannot exist in BC.

While I hear the BC PST model is a dogs breakfast, there are better ways. HOwever, the HST is coming.

You are going to have it your way.

Enjoy

[madmax]

I'm with Riverwind on this one - those businesses trying to get their special interests exempt from GST (or worse yet - zero rated) are freeloaders.

They want other people to pay taxes that may effect those other peoples sales while they get a free ride.

Yeah, Only banks should get a free ride.

[msj]

Yeah, Only banks should get a free ride.

I don't have a problem paying 12% on the interest that I carry (reason being - all my debt is business related so it wouldn't cost me anything anyways).

How about you?

I guess it comes down to whether or not interest income is a good or a service?

And, whether a politician would want to charge HST on it.

Nevertheless, in many ways the banks do get a free ride.

Just look at the US, though. We could be forking over a lot more to them banks.

[msj]

I've given it more thought and the idea of charging GST/HST on interest is more complicated than first thought.

If you buy a new house and pay GST/HST on it and then pay GST/HST on the interest then you are effectively paying tax twice.

If you buy a used house (which is GST/HST exempt) then you are effectively paying GST/HST on that house by virtue of the mortgage interest.

And remember, that at an average of 6.5% over 25 years, the typical home buyer would pay as much interest on the loan as he paid for the house to begin with.

So, Mulroney was right (again! man, for an alleged crook, he sure was right often) for making banks exempt rather than bring in complex rules to charge GST on interest for that but not charge it on interest for this.....

Edited October 6, 2009 by msj

[Mr.Canada]

Just because we can afford to do it doesn't mean we should do it msj, that's just silly. I prefer less taxation whereas you seem to prefer higher taxes for some reason.