Banka: Accountant makes a case for keeping the harmonized sales tax

The HST referendum began on June 24.

The HST referendum began on June 24.

There are still a number of people that I have spoken to who are still on the fence as to whether or not the HST is good or bad for B.C.

I felt that I needed to add my voice to those explaining why you should vote to keep the HST.

Everyone is hopeful that Canada Post will return to work this week and when that happens, the HST ballots will be delivered to your home and must be filled out and sent back by July 22, 2011.

It is unfortunate that the people of B.C. were not given enough information last July when the HST was implemented and that we weren’t able to vote on the change in tax at that time.

I believe that the premier was trying to save the province some money by tagging our switch along with the switch in Ontario, which gave us $1.6 billion.

Due to the public uproar the government has now committed to $1.7 million being spent to educate the public on the benefits of this tax.

I would have rather seen that money be used toward other items such as our health care system, but here we are.

Originally we had the federal sales tax (FST)  and the provincial sales tax (PST). The FST, at that time, was charged on all goods coming into Canada and was embedded into the price of many items. The tax was collected by the provinces, sent to Ottawa and then funded back to the provinces.

The FST was archaic and hard to administer so a tax reform was instituted to expand the items that were subject to tax which was thought to slow down foreign imports and encourage Canadians to purchase Canadian, hence the Goods and Services Tax (GST) was born.

The GST was applied to more items broadening the tax base that would be returned to the provinces for their use.

The PST is also a tax that was embedded in the actual product and additionally charged on top of the price of some products.

This tax was only applied to physical products and not to services and went something like this.

If you were considering purchasing a desk (as an example and ignoring any tax exemptions) here are the approximate steps and taxes that may have been applied to the price of that desk.

First you have the wood that would need to be logged and PST would be applied to the log.

The loggers would sell that wood to the mills who would manufacture that wood into sheets or veneer and PST would be added to that product, so now the cost of the product has actually gone up by 14 per cent because the PST has been embedded into the product twice.

Then the furniture manufacturer purchases the wood and makes the desk and on the sale the consumer would be charged PST yet again.

You would purchase the desk and pay PST on that desk, so now you have paid PST on that desk a total of three times and actually paid 21 per cent over and above the cost of the wood.

So with the arrival of the HST here is how the scenario in the previous paragraph would change.

The logger would charge HST on the logged wood. The mill would purchase that wood and receive a credit for the HST paid when they purchase the log.

The mill would manufacture the sheets or veneer and charge HST on the product.

The product would be purchased by the furniture manufacturer who would receive a credit for the HST paid on the purchase from the mill.

Then the furniture manufacturer would create the desk that would be purchased by the consumer.

The consumer would pay the HST on that product, but would only pay the amount once and would not need to worry that HST had been embedded in the price of the product.

This is the reason that it is expected that eventually the prices of products will come down.

The HST is considered a transparent tax that is not embedded in any product costs.

The conclusion is that the HST is good for B.C. in the short and long run.

Low income families and seniors will receive an increased HST credit.

As consumers, we all need to pay tax so the question is would you rather pay tax that is imbedded in the price, or see the actual tax you are paying?

The website that has the complete information is www.hstinbc.com.  Remember that information is power but due to space limitations I cannot discuss this issue thoroughly and recommend you visit the website.

Gabriele Banka is a certified general accountant and the owner of Banka & Company Inc.

250-763-4528

info@bankaco.com

 

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