The effect of a consumption tax.....

[justoffal]

I really don't know what the business is paying, but the end consumer pays combined provincial and federal sales taxes totaling 30% of the sales price.

Do you think this stifles business? Sincere question.

JO)

 

[Concerned American]

Do you think this stifles business? Sincere question.

JO)

I really couldn't say as I was a tourist and just accepted it because I had no choice--when in Rome.

 

[Dragonlady]

OK....that's a valuable contribution thanks....
Let me ask some quesitons:

So you have no payroll taxation but you find the consumption tax to be burdensome just the same? Do you see it as a major driver of costs?
What is the success of the tax itself? How is the Canadian revenue stream these days?

No trick questions here, I'm asking because I don't know.

JO

There are 2 consumption taxes - one federal (GST) and one provincial (RST), currently totaling 13% on all retail purchases, they're collected as the Harmonized Sales Tax (HST) where both apply. The RST doesn't apply to services or new homes but it does apply to used cars. There are exceptions for both taxes for food, prescription medicines, children's clothing and we still have payroll taxes as well.

How does it affect purchasing decisions? Well it you buy something priced at $199.99, you're going to pay $225.99 to walk it out of the store. Yes, it is a major driver of costs. That new home priced at $300,000 just jumped in price by $24,0000 (provincial taxes don't apply). And that tax is hardest on people at the low end of the income spectrum because they have the least amount of savings or credit.

There is also a federal Goods and Services Tax Refund system in place for Canadians with income under $35,000 per year. They receive a quarterly payment from the federal government. As a senior on a pension, I get around $400 a year. Big whoop.

Our revenue streams are very strong right now. We have very low unemployment, and very low levels of poverty, both increasing revenue and reducing government costs for social programs. We have emerged from the pandemic in better shape than we can have ever expected, but in part that's due to the political instability in the USA.

We were also able to use existing social benefit programs to distribute funds to citizens throughout the pandemic. Instead of creating a whole new PPP Program which corporations applied for, money was distributed to all working Canadians through our existing unemployment insurance program, Revenue Canada (our IRS), and for retired Canadians, through the Old Age Security Pension which is paid to all Canadians over age 65. Instead of having to create new programs from scratch, working Canadians who were unemployed during lockdowns were simply told to apply for a special benefit called CERB - Covid Emergency Relief. Seniors received a one-time boost through OAS, and provincial funds came through our Trillium programs. No wheels were re-invented, and nothing had to be dismantled once it was over.

 

[justoffal]

There are 2 consumption taxes - one federal (GST) and one provincial (RST), currently totaling 13% on all retail purchases, they're collected as the Harmonized Sales Tax (HST) where both apply. The RST doesn't apply to services or new homes but it does apply to used cars. There are exceptions for both taxes for food, prescription medicines, children's clothing and we still have payroll taxes as well.

How does it affect purchasing decisions? Well it you buy something priced at $199.99, you're going to pay $225.99 to walk it out of the store. Yes, it is a major driver of costs. That new home priced at $300,000 just jumped in price by $24,0000 (provincial taxes don't apply). And that tax is hardest on people at the low end of the income spectrum because they have the least amount of savings or credit.

There is also a federal Goods and Services Tax Refund system in place for Canadians with income under $35,000 per year. They receive a quarterly payment from the federal government. As a senior on a pension, I get around $400 a year. Big whoop.

Our revenue streams are very strong right now. We have very low unemployment, and very low levels of poverty, both increasing revenue and reducing government costs for social programs. We have emerged from the pandemic in better shape than we can have ever expected, but in part that's due to the political instability in the USA.

We were also able to use existing social benefit programs to distribute funds to citizens throughout the pandemic. Instead of creating a whole new PPP Program which corporations applied for, money was distributed to all working Canadians through our existing unemployment insurance program, Revenue Canada (our IRS), and for retired Canadians, through the Old Age Security Pension which is paid to all Canadians over age 65. Instead of having to create new programs from scratch, working Canadians who were unemployed during lockdowns were simply told to apply for a special benefit called CERB - Covid Emergency Relief. Seniors received a one-time boost through OAS, and provincial funds came through our Trillium programs. No wheels were re-invented, and nothing had to be dismantled once it was over.

In some aspects then the general tax is superior to the payroll tax system here in the US. For one thing it's far more reliable as a revenue stream. Though I am not deaf to the effects on transactions and certainly not to the real estate effect....that is indeed quite profound. Hmmm....some good things to think about first.

Thanks
That was quite helpful

JO

 

[Dragonlady]

hmm.....so the restaurant has to pay consumption tax to buy the stuff to prepare and it gets taxed again when you buy it from them...is that it?

There is no consumption tax on food purchases for home consumption or for restaurants to use in food prep, but there is a consumption tax on the restaurant sales.

Businesses are exempt from paying any HST, but they have to collect it on their sales. They submit a return to the government wherein they report the taxes collected on their sales, and subtract the taxes paid on their retail purchases. For example, they would be required to pay HST on their liquor purchases, but could then deduct the tax paid from the amount of tax collected on the HST return, paying only the addition taxes collected from the sale of the liquor in the restaurant.

 

[Dragonlady]

In some aspects then the general tax is superior to the payroll tax system here in the US. For one thing it's far more reliable as a revenue stream. Though I am not deaf to the effects on transactions and certainly not to the real estate effect....that is indeed quite profound. Hmmm....some good things to think about first.

Thanks
That was quite helpful

JO

We still have a payroll tax system, and corporations do pay income tax, they're just exempt from value added taxes.

 

[justoffal]

We still have a payroll tax system, and corporations do pay income tax, they're just exempt from value added taxes.

OH dear.....so it has not replaced the payroll tax then? Hmmm...... now there's a real problem. That's probably exactly what would happen here in that case.
They would begin by saying that they were going to PHASE out the payroll tax as the value added tax came in....and then they would just forget to do it.

JO

 

[Toddsterpatriot]

For administrative efficiency, this should probably be limited to amounts over an inflation-adjusted amount of $5 million or so. This would not be an undue burden for people with net assets above this amount, since they already are (or should be) keeping track of their investments.

Cool. How much is this mansion worth? You taxing on the value or the equity?
What about this artwork? It's a genuine Hunter Biden.

 

[dblack]

OH dear.....so it has not replaced the payroll tax then? Hmmm...... now there's a real problem. That's probably exactly what would happen here in that case.
They would begin by saying that they were going to PHASE out the payroll tax as the value added tax came in....and then they would just forget to do it.

JO

Ayup