The HST - what do we know about it?
OK this is from a non-economist so don't get wound up about the numbers just critique the reasoning. We are going to get a new tax and people will get tax rebates and business will get a lower corporate tax rate. This where it gets sticky. Consumers pay more actual cash but will get tax rebates (up to $1,000 cheque in the mail) and the promise of more jobs from a more efficient business sector. The business advantages are becoming quite clear, they will get a lower tax rate and relief from paying tax on items purchased for the business. The HST is widely seen as a contributor to making businesses more competitive because it does not tax businesses' purchases, including many capital items, that were subject to the old retail sales tax. If this is true then that help for business is good. What isn't good is the lowered corporate tax. Corporate taxes are paid on net income, just like personal tax. You reach the net by deducting expenses from the gross income. The more allowable expenses there are will determine the amount of net income. The rest is profit. Profit can be used in many ways but is usually taken out of the business by the owners. So, in my reckoning if a business owner has profit and don't forget that there is a high amount of net income that is not taxable before hitting the threshold, it's all gravy. Why are we making it easier for a business owner to cut his costs (and increase productivity) - good and allowing the owner to keep more profit - bad?
9 comments:
So, if my family actually gets the promised 3 payments of $1,000 each, how much additional tax will that offset? In other words, how much will the additional hit of HST accrue in 18 months? Are there estimates out there? This seems like a lot: $3,000 in additional tax in 18 months
The Province is giving money away to Business for the simple reason that they need their support to bully this HST through the legislature. The Chamber of Commerce in Ontario wields a very big stick, after all; much bigger than any individual taxpayer.
For us, we get the bribe of rebate cheques to shut us up. Many of us won't take the time or don't have the math skills to figure out we are getting screwed, again.
This move was inevitable, it was just a matter of time.
To the first anonymous: the promised HST rebates are $1000 per couple/family earning under 160k, or $300 for a single person earning under 80k.
Harmonizing the taxes makes sense and I agree with it generally. But the Ontario government has turned it into a massive tax grab because they'll be collecting tax on many things they never did before.
When the HST was introduced in the Atlantic provinces, their governments actually reduced the provincial tax rate a couple percentage points to ensure it remained revenue neutral. Meanwhile our government buys us off with a one-time kickback, like Deb O said, so that we'll pay more in the longrun.
Unfortunately I don't know enough about business taxes to comment intelligently on that topic.
Corporate taxes are already too low in Ontario, thanks to the Harris tories. By cutting them further, the Province is buying their support for the HST too.
Where is Manfred to give us his own first hand take on this as a business owner? I'd be curious to see what he says.
The rebate through 3 payments of $1,000 is not only expected to cover the additional tax paid in the first 18 months. Rather it is to cover that plus a sort of down payment on future HST outlay. And yes it is 3 payments of $300 for an individual.
So, there is not expected to be $900 in extra taxes per individual or $3,000 per family in the 1st 18 months.
How much extra these families and individuals has not been projected anywhere I can find.
Here is some comment on one effect of reducing corporate taxes in Canada:
Canadian corporate tax cuts hand $4-6 billion to U.S. treasury: study
November 3, 2009 Press Release
OTTAWA—Planned federal and provincial corporate tax cuts will transfer $4-6 billion of annual revenue from Canadian governments to the U.S. treasury, concludes a study released today by the Canadian Centre for Policy Alternatives (CCPA).
The study, by economist and CCPA Research Associate Erin Weir, explains that the U.S. taxes its corporations on a worldwide basis. When an American corporation repatriates profits from Canada to the U.S., it pays the 35% American federal corporate tax rate minus a credit for taxes already paid in Canada. Given a Canadian corporate tax rate below 35%, American corporations will have to pay the rate difference back to Washington.
“For American corporations, the only effect of deep federal and provincial corporate tax cuts will be to transfer some of their tax payments from Canadian governments to the U.S. treasury,” observes Weir. “Canadian governments can ill afford such revenue losses, particularly given concerns about the prospect of ongoing budget deficits.”
Furthermore, cutting corporate taxes is unlikely to attract investment or jobs.
“If American corporations must pay the U.S. federal tax rate on their Canadian profits, a lower Canadian tax rate will not make their existing Canadian assets more lucrative, let alone induce them to invest more in Canada,” Weir says.
The report recommends that Canada enact a combined federal-provincial tax rate of at least 35% to retain revenue that will otherwise be shifted to the U.S. treasury. Canadian corporate taxes would still be lower than the combined U.S. rate because all but three states apply additional corporate taxes over and above the 35% American federal rate.
those who complain about low corporste tsxes simply don't understand the system. when you take a dividend out of a corporation it is taxed as INCOME with a credit for the corporate tax paid. if the corp income is under 500k the total tax rate is the same as for any other income about 45%.
Anon, it is you who does not understand the difference between a corporation paying corporate tax and a share holder paying on their individual profit from that corporation. Not the same thing.
And I do believe that dividends are awarded a tax credit thereby diluting the amount of tax paid on dividends, and not all dividends are taxed some are expensable.
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