HST

In Ontario, most purchases are subject to the 8% PST and the 5% GST. As of July 1, 2010 these two taxes will be replaced by the 13% HST. While this doesn’t sound like it’ll change anything because 8% and 5% add up to 13%, the HST is controversial.

The biggest single issue is that under the current system, the GST applies to more items than the PST. Although some things will continue to be taxed at 8%, some of the existing exemptions will be lost. The government claims that many manufactured items are taxed more than once during their making, and the HST will make them more inexpensive because this practice will stop. The manufacturers can then pass the savings on to the consumer. Further, businesses will find cost savings in having to deal with only a single tax rather than two. This will allow them  to hire more people and stimulate the economy.

I wonder, though. Is it so much more costly to get the paperwork right when most items are subject to a 8% tax and fewer are also subject to a 5%  tax than when most items are subject to a 13% tax and a few items are subject to only a 5% tax? It seems that it shouldn’t make a big difference but I’m no accountant.

Some things will cost more. On the Ontario Ministry of Revenue site, there’s an HST FAQ. One of the questions is:

Won’t certain things cost more?

For some items and for some people, it would mean price increases — and that’s why we would be providing $10.6 billion over three years in tax relief for people, which includes permanent personal tax cuts and direct payments to Ontarians.

Unfortunately, the price increases will be permanent though the three-year tax relief will end all too soon. And the government makes no promises that this relief will make up for the price increases.

The suggestion that more items being subject to tax is offset by a savings being passed on the consumers is dubious at best. If this whole exercise is revenue-neutral, why is Ontario reducing its provincial income tax rate by 1% for the first $37,106 we earn each year. Surely they’re not just going to give us $371.06 out of the goodness of their hearts. And what about the rebates? Families with an income of less than $160,000 will receive $3000 and individuals with an income of less than $80,000 will receive $900. If the government didn’t know it would be receiving more money, why would they feel the need to ‘sweeten the pot’ with this rebate?

Is the new tax scheme so much better than what we currently have? For the government, it certainly is. Why else would they be doing it? I don’t know how much of an effect it will have but I still find myself patting my pocket to make sure my wallet is there.

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4 Comments

  1. Shawn
    Posted November 17, 2009 at 09:48 | Permalink

    Lower prices, my ass. If you remember when the GST came into play, some items were immediately marked down on the store shelves. and then over time, regular price increases eliminated that saving. In the end it will just cost us more. Dalton is just a blood sucking maniacal dictator that has done little good for the province. Did I just say that out loud? GOOD!!!

  2. Brad
    Posted November 17, 2009 at 12:20 | Permalink

    I agree Shawn!

    I was working in retail when the GST came in. We had to reticket all items to “compensate” for the 7% GST. At the time prices would be rounded to end in 9. I suppose this is becuase $2.00 feels so much more than $1.99.

    So a package of film which was priced $4.99 was reduced to $4.67 or some such “odd” number. You know what, the next time a new order of film arrived it was back at $4.99.

  3. Jonathan
    Posted November 17, 2009 at 14:30 | Permalink

    Is it just me or does it sound like people who make $80,000 or less are getting the shaft at $900 tax relief, compared to the people who make $160,000 or less who get $3000 tax relief?

  4. Laura
    Posted November 20, 2009 at 13:51 | Permalink

    GST only is charged on a lot of services, such as haircuts, your home gas supply, legal bills, child care and renovations. If a family of 4 spends $80 per day for child care (which is a fair going rate in Ottawa), they are paying $20,000 per year. If this amount has an additional amount of 8% added on to it, they are paying $1,600 extra per year. This is exactly the reason why a Family making under $160,000 would receive a larger rebate than an Individual. I think the Provincial Government is definitely going to make more money in the long run.

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