The Harmonized Sales Tax (HST) has attracted no shortage of detractors (and call-in show anger) in both Ontario and British Columbia. Both provinces intend to convert from today’s Federal GST + Provincial PST system to a single HST on 1 July 2010. The combined rate (GST + PST) and the HST rate are the same: 12% in BC; 13% in Ontario. So, why the uproar?
Let’s set aside the “look at all the things currently PST-exempt that will be HST-chargeable” comments. Yes, my clients will have to pay a 12% HST rather than a 5% GST for my professional services. Since 100% of my clients are businesses, they, in turn, will turn that 12% into an input tax credit (ITC). Meanwhile, such supplies as I buy today that I pay PST on — say, anything bought from an office supply store — now become an ITC for me to deduct from the HST owing at the end of the quarter. Is it a pure benefit? No, of course not. Neither is it as bad as it is made out to be.
Odd, isn’t it, how many people — especially the same call-in show hosts and talking heads that today decry the HST — dumped all over the Conservative Government for taking the GST rate from 7% to 5%, saying it was bad economics not to tax consumption, and now dump all over the two provincial governments in question for creating a consumption tax rather than a transaction tax (which is what a PST is).
Yet we don’t see these people called out on this. No one phones in to say “bloody hypocrite” — of course, it’s equally likely that such people are amongst those stuck in the queue, never reaching the air, and whose recorded message is just never broadcast. The media game is layered in hypocrisy, as are all moribund, decayed institutions run for the benefit of those in charge rather than for the traditional purpose they serve in society.
Frankly, the challenge that ought to be levied against the HST is the same one that ought to be levied against the existing GST and PST: all of these turn independent businessfolk — the entrepreneurs simply trying to keep their families fed in an honest manner — into unpaid clerks. Most then in turn must hire accountants to do the paperwork (more expense, money out of their pockets). Remittances must be made based on when the service is performed, not when the invoice is paid: these people are often out of pocket for weeks. These taxes require anyone who makes more than $30,000 per year through their own efforts to become a tax collector.
That’s worth shouting about. A change in calculation methods is not.
As a consumer, yes, services costs are going up. My barber need not charge PST; he will have to charge HST. There are many others. In turn, though, as a consumer (the only person who can’t play the input tax credit game to pass it all on to the next player in the “value” chain), how much I spend, and on what is up to me.
Am I likely to cut my barber off? No — but I am likely to stop being lazy and going to the local café for lunch and instead make my own. The fact that there are winners and losers, however, is nothing new: every tax change creates them; the only tax regime that doesn’t distort the economy somewhere is the tax that is repealed, or never applied.
Knowing this, what I am actually even more likely to do is go to my local, entrepreneurially run café from time to time — and stay far, far away from chains of any sort. You see, the chains have the resources to be tax collectors; the couple that runs my local café (she waitresses and tends cash; he cooks) have to give up their limited personal time to do the government’s bloody paperwork. If anyone deserves my support, it’s them — not some faceless corporation with outlets from one end of the country to the other that opens and closes locations based on profitability targets and not upon how well the location is actually doing in the community (a place it doesn’t know and doesn’t care about).
Yet it is the entrepreneur who is likely to go under with this change, not “big corporate eatery, inc.”.
What does deserve opprobrium, and in spades, is the sheer waste of our tax dollars on useless programs, taxes on taxes, and governments that think tax raises in the future (deficits to be paid down) are perfectly reasonable choices to make. But the “something for nothing” and “my neighbour should pay” crowds are drowning out the fiscal conservative.
What deserves even more disdain and active opposition is politicians who fight elections on one tax policy, then, within a few weeks, reverse themselves and impose it. (Gordon Campbell and his BC Liberals come to mind: the Finance Minister, my nogoodnik MLA, denied outright we’d do an HST, then reversed field after the election. Liar!) But no one is willing to consider doing anything about that: callers in BC are resolute that no other party could possibly, ever, be elected.
Instead, the whingeing continues; the small and independent business person will be burdened once again, and our society will all truck off to the chains to save a nickel. We are a sick, sick people.
As for me, I’m going to find an ordinary job and draw a salary. I’m tired of being unpaid labour for governments. The market can bloody well do without whatever value I offered it. The less I make, the less I’ll spend. Stick that, Mr. Premier & Mr. Prime Minister, in your GDP calculations and smoke it. Oh, and I’m leaving British Columbia. The province I go to will probably have an HST, but at least I won’t have to put up with brain-dead fellow citizens and known lying manipulators in office.
The outrage of some people is understandable: they will pay tax on things they didn’t pay tax on before, for example.
But I have to say that I very much support the idea and concept of consumption taxes. As David Frum also explained in one of his books, we must move away from income taxes entirely and move to consumption taxes instead.
In other words: let’s have consumption taxes, such as GST/HST, etc., at a higher level than today, but scrap income taxes completely!
The reason why so many people are now upset is that, this being dysfunctional and silly Canada, where nothing is ever done right, they will end up paying income AND consumption taxes, instead of ONLY consumption taxes, as it should be.
The economist in me also supports a consumption, rather than income, tax regime.
My own personal favourite form for this — which avoids all the bloody paperwork and replaces it with a once/year postcard — is as follows:
1. What did you earn?
2. Subtract anything saved or invested (incl. in a business).
3. Add anything pulled from savings/investment.
4. Subtotal: this is what you spent (consumed).
5. Apply consumption tax rate.
There you are: five lines. No tallying up of ITCs, no income tax (invest/save what you make and pay nothing). A tax regime geared for self-employment.
Could be done quarterly, even monthly, if needed.
Alas, we wouldn’t need tens of thousands of CRA agents, tens of thousands of lawyers, tens of thousands of accountants — and “stimluating” spending wouldn’t be a weapon in the Bank of Canada’s or the Government’s arsenal. So it stands no chance.