There is no doubt that people generally do not like change. It is almost a natural law in that change can be discomforting by rocking the boat on daily routines, which could lead to shaken confidence.
The implementation of a harmonized sales tax is a fundamental change announced in last week’s provincial budget. By July of next year, a new tax structure will be implemented, combining the present provincial sales tax and the national goods and services tax. The HST, as it is called in other provinces that have already harmonized, has shown some benefits; chiefly less paperwork and a competitive edge for some industries. Similar ideas were expressed when the GST was brought in as a value added tax nearly two decades ago.
While it is too early to roundly condemn or applaud the move, we are very concerned that such a diametric shift in tax policy is very poor timing. Were the economy brisk, as it was in other jurisdictions that made the switchover, there would be little fuss, but in light of the volatile economy of today, the timing for such a change could hardly be worse. Combine the unknown with another unknown – and there is a chance for exponential misery for small businesses that are just hanging on at the moment.
Manufacturing groups, as an example, seem to like the plan. Business organizations more familiar with that sector see it as good News.
For service industries that currently charge only the GST, the implementation of heavier taxation cannot help but spell interim trouble. Like the GST before it, all competitors will be in the same boat, but it must be recognized that the consumer has just one wallet and an 8% attack against cash flow is a significant one. At the very least, we see several initial reporting periods filled with frustration – and those filing short of cash.
Currently, many goods and fast-food choices are free of the PST, recognizing that less well-to-do people have a rough go as it is. The pressure inflicted by this 8% increase is significant, despite claims by the Dalton McGuinty Liberals that tax credits and rebate cheques will offset that cost on the poor. Those notions are of little help when the customer is short of the cash to make a purchase when standing in line.
As has been the case with most taxation measures under Premier McGuinty, we hold no illusion that this time will be different. This tax change is about generating revenue. Doubters, who believe this time is different should think back to the interim health tax that is now a permanent one. Think also of the big hit that small business proprietors took when forced to personally file for Worker’s Compensation – with little hope of ever collecting.
The implementation of a harmonized tax system could very well make these dreadful economic times linger much longer than expected. It sure does not create an air of confidence, which is really what our economy lacks today.
