The Harmonized Sales Tax impact on local businesses
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By LeRae Haynes
In a recent press release, BC Premier Gordon Campbell and Finance Minister Colin Hansen said that BC will follow Ontario in creating a single sales tax in their province on July 1, 2010. The harmonized sales tax in BC will be 12 %, the lowest for those provinces that have agreed to combine their provincial sales taxes with the GST.
On goods already subject to the provincial tax, the consumer will not pay more, as long as retailers drop their prices as their own tax bills fall. The theory is that retailers should be able to reduce prices to offset what will be an explicit sales tax, although they will not be required to do so.
Once fully implemented, the HST is said to reduce sales taxes paid by business by $1.9-billion, and save companies $150 million in administrative costs. Mr. Campbell said that businesses, which will be able to claim HST rebates in virtually all cases, will see major cost savings.But the savings for business will become new costs for consumers. A number of basic goods will be exempt, including basic food items, diapers, children's clothing and shoes, car seats, booster seats, books and feminine hygiene products. A large number of goods and services formerly not subject to the PST will fall under the umbrella of the new Harmonized Sales Tax, including hair cuts and restaurant meals, as well as far larger expenditures such as new homes.
Steve Alexander from 150 M&S Tire and Service said that the new tax will mostly affect him when he buys tires for his business. “It’s good and bad: it might make it easier because there’s one tax, but I’ll still have to pay more when I buy tires. Hopefully the ranchers will still be exempt,” he added. “I think we pay enough taxes as it is.”
“It’s going to have a major impact on small businesses---they can’t come down in prices just to accommodate the government,” stated Ayla Surek from Stitch in Time Sewing. “I own a small business and since the downturn in the economy, I’m already not taking home a pay cheque. People are now wearing their clothes till they fall apart.”
She said that the HST will double the amount of taxes she has to charge her customers. “Every little tiny store will have to close. The big businesses in BC are eating up the small ones,” she continued. “The politicians are always giving the big shots a break and not us little ones. Where is the fairness in that?”
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