HST Lies & Misinformation

Posted 2009.12.16 12.43 in Pointless Blather, Work by Stephanie

So far, it looks like Ontario is still going ahead with this HST nonsense. Mostly, I don’t really care one way or another – it’s a zero-sum change for me. Being an entrepreneur and working in small business, whether the GST is 5% or 13% is largely irrelevant due to the way the tax is managed with the ITCs balancing the taxes collected.

One thing that I really dislike though, is when governments lie and mislead in order to push their agenda through.

Will the move from GST (5%) + PST (8%) to HST (13%) cost the average consumer more money? No. The 13% rate won’t apply to stuff that’s currently PST exempt.

It’ll be a huge pain in the ass for programmers and accountants etc. to get this set up for retailers’ POS systems, but generally speaking the actual tax rate isn’t going to change.

They don’t need to add lies or misinformation to sugar-coat it. What am I talking about? Specifically, this paragraph I keep coming across in the Ontario Ministry of Revenue‘s website:

Right now, provincial sales tax is paid by most businesses at each step in the creation of a consumer product. In other words, though you may not realize it, the PST is charged multiple times during the production of a product before that product reaches the store. So it can be a tax on a tax on a tax, all hidden in the cost of a product until it gets to the consumer. Under the HST, most taxes paid on business inputs will be refunded to the business — savings that can be reinvested and passed on to consumers.

I’ve been working with small businesses for over two decades. I can tell you that the PST is not charged multiple times during the production of a product. This is simply a flat-out lie.

If you are a retailer and you have a vendor permit, you must collect PST and remit it to the government. When you buy goods to sell to your customers, you give your vendor permit number to the distributor, and therefore the distributor does not charge you any PST.

When the distributor buys goods from the manufacturer, the distributor gives their vendor permit number to the manufacturer and therefore the manufacturer does not charge PST.

And when the manufacturer buys their raw materials which are destined to go into the construction of a finished product that will eventually be sold to consumers, the manufacturer gives their permit number to the raw materials supplier, and therefore there is no PST on the sale of those raw materials.

PST is not levied and collected multiple times, it is exempted multiple times, and only levied at the final retail sale to the consumer.

Yet the MoF appears to be suggesting that you can expect to see up to an 8% drop in the price of goods, because that ‘multiple charging of PST’ will no longer happen – and if you don’t see the price of goods going down, you’ll suspect that the business is ‘pocketing all that savings’ and trying to ‘stick it to the consumer’.

The MoF is creating a false expectation in an attempt to sell their HST plan, and when it doesn’t materialize, then businesses will be the scapegoat.

Screw you, MoF.

I will conceed that there will be a few very, very small areas where PST is paid and becomes a cost of doing business, that under HST businesses will be able to recover. Their gas bill. Their phone bill. Office supplies (pens, paper, etc) that they buy for internal use. Office furnishings and equipment.

With the exception of a few rare / unique circumstances, these represent only a tiny fraction of the annual expenses of a given business. The bulk of a business’s expenses will be in direct support of their sales, and if it’s a direct cost of sale, then it’s already PST exempt.

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