There seems to be quite a storm surrounding the defeat of the HST lately. I was talking to a friend the other day that was quite upset about the result of the referendum. As I don’t think the matter was fully explained or understood by many people in our area I would like to try to explain it as I understand it.
I have a small business and have been dealing with the GST for some time. The HST has similar rules to the GST. In effect the business owner becomes the Tax collector both GST and PST, however the rules are different between the two taxes. The GST rules allow the business to deduct the amount of GST that they paid out, (for goods and services except labour), in order to conduct their business. Business’s would deduct this amount from the amount of tax they have collected. This results in a zero balance of GST paid out to conduct business.
The PST does not have the same rules. What a business collects is what it pays to the Province. There is no rebate.
With the HST the business would work out the same as the GST. Business could reduce the amount that was collected by the amount that it paid out to conduct business, except labour, thus giving it a zero balance on HST paid out.
Prior to the HST being introduced the seven per cent PST would go to the province but now with the HST a portion of the seven per cent is paid to business to reduce their HST paid out to ZERO. Plus many things that were exempt under the PST (children’s clothes, school supplies, etc.) are no longer exempt under the HST. This has created a larger sales tax base resulting in millions more tax dollars collected for the Government.
This tax is beneficial to business, creating a business climate with no sales tax on costs to do business. In some cases this could total millions.
This is how all the sales tax burden shifts onto the working men and woman. And as we all know the working man and woman pays 12 per cent sales tax while business pays nothing in sales tax. When you hear people talking about this as an unfair tax, this is what they are talking about.
I’ve heard the argument about how many will lose their jobs and how the economy will suffer with the defeat of the HST. But those comments are coming from the business’s and economists that are benefiting from the HST and simply do not want this benefit to end. I believe that this is nothing more than scare tactics.
I personally, don’t think we should be spending our tax money to subsidize business while social programs, health and education suffer.
I was happy to see the HST defeated.