Monday, December 14, 2009

Reading the Notes

When it comes to taxes, levies, fees, and whatnot…basically any additional charge lumped onto the product or service I am purchasing…I am normally cautious as to why the fee is present, and where/how the fee is being utilized. So of course when the Ontario Government announced the new "value-added" tax structure of combining the Retail Sales Tax (PST) at 8% with the Goods and Services Tax (GST) at 5%, I was instinctively pessimistic. Initially, the Liberals stated that it was a measure required in order to create jobs. Then, when it became apparent that the Provincial Government was going to receive a hefty windfall of additional tax revenue not previously realized under the existing 2-tier tax payment system, the electorate and the Official Opposition Party pushed back. It appeared that the new HST was a cleverly disguised form of a simple tax grab.

    The Lobbyists and Economists who support the HST initiative will tout that, overall, there will be no real gains or losses realized by this new taxing system. After all, once you've completed your tax return and realized some gains as a result of the HST implementation, your increased expenses that you incurred throughout the year leading up to your tax return will be negligible. To drive home this point, a report was (I dare say hastily) prepared by the Canadian Centre for Policy Alternatives titled Not A Tax Grab After All: A Second Look at Ontario's HST. Authoured by economist Ernie Lightman, the report admittedly makes assumptions based on only the available tools available. To be fair, I will admit when I'm wrong or have misjudged something, however I still have this nagging feeling that this Report is just another 'smoke and mirrors' campaign to quell the objectors of the HST.

    After reading any 'report', I always read the "Notes" section to ensure supporting arguments are well documented. This particular Report had some rather interesting "Notes", a sample of which shows:

    Although reductions to the rate of tax in the bottom tax bracket is often touted as benefiting lower income people, in fact most of the benefits of such a change flow to those who are higher income, since everyone who pays income tax has some of their income taxed at the lowest rate. Most people who are low income already pay very little in personal income taxes.

    I'm no expert here, but I'd feel comfortable stating that the above "Note" appears to be nothing more than a disclaimer on the Reports assertion that lower income families/individuals will benefit from the HST. As the "Note" clearly states that this is not the case.

    So I guess what we have here is a bit of a stalemate. On the one hand we're going to be paying more at the consumer level for goods and services purchased which was previously PST exempted. While on the other hand, the Government (with support from this particular Report) are indicating that you'll save more when you file your taxes. The question will be whether you can afford to spend more upfront to save more at the backend. I honestly don't have the answer, but what I do know is that I'll be spending about $140 more per month (this according to the Tax Calculator found at I'm still unsure how this is going to help the economy, as I am finding myself looking for spending reductions in preparation for the HST. The products and services the I use now which are exempt from PST will experience the greatest pain of this new taxing format.


1 comment:

  1. Although this HST will cause some short-term hardship during the transition period. There are a number of measures aimed at helping people with low-incomes.

    First, there are transition cheques of $300 - $1000 in the first year. Second there are permanent income tax cuts for 93% Ontarians. As part of this 90,000 low-income earners will no longer have to pay personal income tax.

    The experience in the Atlantic Provinces shows that cost savings to businesses were passed down to consumers. A recent report by TD Bank states that this will be the situation in Ontario as well – and will happen in the first year.

    A report by economist Jack Mintz, “Ontario’s Bold Move to Create Jobs and Growth” confirms that Ontario needs to reform its tax system to create jobs and put Ontario back on its feet. It says, as a result of the HST, within 10 years Ontario would see:
    o An estimated 591,000 additional new jobs
    o Increased capital investment of $47billion
    o Increased overall annual worker incomes of up to 8.8 per cent, or $29.4billion

    The HST will help get people back to work and improve Ontario's economy - something that will benefit all of us.

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