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Harmonized Sales Tax
Recently British Columbia has been the stage for angry consumer protests regarding the new harmonized sales tax that is going to hit B.C. and Ontario next July. Starting on Canada Day 2010, the provincial sales tax will be buddied up with the federal goods and services tax to form a new harmonized sales tax, already in use in many provinces. In political theory, this is supposed to help these two provinces that are hard hit by the current economy, but in reality, consumers in B.C. and Ontario will be shelling out an extra 1.5% overall on consumable purchases.
The reported logic behind the harmonization is to reduce costs to businesses, making them more cost effective and competitive. Currently, separate taxes mean separate filings and payments for businesses, in essence, more time and money spent on paperwork and administrative costs.
While B.C. is offering new income tax credits for low-income earners, Ontarians will get some relief in the form of rebates. Families with an income of $160 thousand or less will receive $1000, while single persons bringing in $80 thousand or less will get $300. Will that offset the additional taxes on currently exempt items such as haircuts? Highly unlikely.
Farmers in Ontario may lose their current provincial point of sale tax exemptions. This could potentially hit our kitchen tables. Currently, Ontario farmers can show their Farmers membership card at the cash register when purchasing products and supplies exempt from PST for farm use. The loss of this exemption means an increase of out of pocket expenses for daily farming operations. For farmers, we're not talking pencils and paperclips here, but an extra 13% shelled out to buy a tractor is a painful budget expense. Sure, they can apply for the refund on taxes paid after the fact, but the upset to cash-flow will certainly be felt in Ontario supermarkets.
Almost daily, we see an expansion of the list of PST exempt items that will go up once the harmonization takes hold. Other provinces who already have combined taxes offer little comfort to concerned consumers in Ontario and B.C. Both provinces have assured families that diapers and children's clothing will be exempt. Be sure to earmark that savings to apply to your higher electricity bill.
Call it a tax grab or tax reform, the fact of the matter is that Federal and Provincial governments have put themselves on the taxation buddy system. With most of Atlantic Canada and Quebec taking the lead over a decade ago, there is little chance that protesters will have enough influence to stop this growing provincial trend. The best they can really do is attempt to soften the blow and push for more exemptions, income tax credits and stronger rebate offers.
With the Feds pulling out their cheque book to provincial leaders to help with the transition, it's only a matter of time before Manitoba, Saskatchewan and Prince Edward Island succumb to the harmonized sales tax. That leaves only Alberta to stand alone as the only province in Canada that doesn't have any provincial sales tax to harmonize.
