This is not an attack on Mr. Rinaldi in the least. In fact, his explanation and personal accounts of the implications of the H.S.T lead the listener to believe and trust this is not a fool-proof system and it is not a cure all for financial instability. Mr. Rinaldi was honest and compassionate about his concerns for the average citizen and consumer, which should be the role of every minister of public welfare. But how far will compassion and sympathy go? Will it keep money in our pocket books?
Amidst the understanding this was a public forum however, you couldn’t shake the feeling that positivity was being washed over the discussion. Mr. Rinaldi dominated the question period with anecdotes, and diffused attendant outcries with humour and tangential case examples. Attendant complaints and arguments, while answered by Mr. Rinaldi, were supplemented over top with rebuttals from members of his own office, an impressive, albeit suspicious, defense tactic.
We all use and need public services; governments need taxes to administer these. There is no debate about that. Canada is provided with some of the best services and the lowest costs in the world. We have a relatively affordable cost of living in terms of fuel, food, materials and consumer products. This is, in part, because of the government we’ve put in place.
We also have a $27.4 billion deficit in Ontario at approximately 2.5% interest with billions of dollars in buyouts on the table and some already passed on. Someone needs to front the cost.
This is where taxpayers come in handy and Mr. Rinaldi claims that returns will be seen with the H. S. T. anywhere between 5 and 10 years. He adds that using the H.S.T as an investment will produce jobs and growth and keep Canada competitive.
Competition it seems is a real push in the H.S.T agenda, where small businesses and corporations alike can benefit, in part, by now claiming H.S.T on all business expenses where they lost the cost of the P.S.T before. This is a real benefit where, depending on the size of your operation, dollars can be saved and traced back to your pockets.
Additionally, R.S.T (retail sales taxes) fronted by retailers on all business inputs (materials and services employed by the business) will be reshuffled into a V.A.T (Value added tax) at all levels from primary producers, to manufacturers to retailers. These savings are assumed to carry on through to the consumer.
The H.S.T also will simplify administration through one set of books, one remittance, one audit etc., and thus less paperwork.
Corporations will be provided $4.5 billion in tax relief over three years through corporate income tax cuts, eliminating surtaxes, and exemptions from the corporate minimum tax. This relief will translate into income tax rate cuts. Businesses can also benefit from property tax relief through a marginal reduction in the education levies of property taxes.
Individuals in the lowest and middle income brackets will receive $4 billion in transition relief, rebating couples and parents up to $1000.00 ,and singles up to $300.00.
Personal income taxes for those brackets (i.e $0-$37,106/year) will see a reduction in rates from 6.05 to 5.05% this year. There is an additional $270 million in property tax credits and up to $260.00/adult in sales tax credits - both applying to low and middle income earners.
Bear in mind though that the aforementioned material was provided indeed by revenue Canada and is intended for you to focus on the savings and not the expense. They, like any business, highlight roll-backs and discounts and rebates while they tend to wash over the small print and neglect to mention embedded costs.
According to this handout, benefits will spread across the manufacturing industry, and retailing and small business operations through the aforementioned credits and tax relief.
The worry therefore is for the added expense for the average consumer and citizen. While not written on the lines of this report, the H.S.T. will apply to all goods and services that have existing G.S.T today. The breakdown provided suggests that 83% of goods and services taxes will remain unchanged. It’s the 17% that Ontarians question.
All fuels and energy inputs will have additional taxes as of July 1, 2010; this is the fuel for your car, or truck or farm implement, and the heat and hydro for your home. The H.S.T is applied on top of existing excise and fuel taxes, so we’re taxed on the taxes.
Most private professional services and administration costs like insurance brokerages, public transit, hair dressers, and realtors will add H.S.T to the purchase of their service, alcohol fees become taxes. These costs are paid at point of sale and carried all year until taxes are filed. Months afterward your rebate (or relief as it’s called) comes in, too little, too late.
So the crux of the matter - businesses save through harmonizing Retail Sales Tax at all levels of production. They can claim all taxes on all business inputs where they formerly could only claim G.S.T and not P.S.T. This presumably, will allow for significant savings in business, thus opening up opportunities for employment, creating jobs, and in the course of things, reducing the cost to the consumer, making business more competitive on a local, national and international scale.
However, these companies have to front the cost of tax inputs, as does the average consumer, substantially contributing to bigger energy bills and building upon embedded costs in the production of all goods and services. So in the end, you are no better off than you were before. Saving money here to spend money there.
Reports circulated by Revenue Canada claim that the average Ontarian will experience a neutral or very marginal change in expense in the coming years, totaling no more than $50-75 either in deficit or surplus. Estimates claim that the lowest income earners will benefit $90/year on average, and the top income earners in Ontario will have to pay $390 more annually.
If this is the case, most of us can sleep easy tonight. While the outcome of harmonized taxes and building a more competitive environment for Ontario (and Canadian) businesses has yet to unfold, if we want to benefit from H.S.T we better plan on starting up a business and/or make less money, or perhaps we can be charmed into complacency.