OT- Contractor

[Lennart Sorensen]

On Tue, Jun 22, 2010 at 06:38:15PM -0400, Christopher Browne wrote:
> GST and PST are quite different kinds of taxes, notably in the area of
> exemptions.
> 
> The intent of PST is that it is to be applied only to consumers; when
> businesses buy goods to use, notably for resale, business purchases
> are commonly PST-exempt.
> 
> In contrast, GST is "layered"; GST is to be applied to substantially
> all kinds of sales, whether to individuals or to businesses.  But when
> a business buys goods to which GST was applied, they get a credit for
> that.
> 
> Thus, supposing GST is at 5%...
> 
> A business buys $105,000 worth of materials and stuff, which had $5K
> of GST in it.
> 
> They sell $210,000 of stuff to other folks, of which $10K is GST.  No
> "exemptions" here.
> 
> That business would be expected to pay CRA $10K - $5K = $5K of GST.
> 
> Historically, wholesalers and manufacturers have been reluctant to
> sell to individuals, as this, in a PST-like tax regimen, draws them
> into needing to figure out who's exempt and who's not.  They'd much
> prefer, in that case, to avoid even needing to think about PST.  I'm
> nearly certain that's why there used to be wholesalers that wouldn't
> deal with individuals.  (And I think I only realized that fact just
> now.)

Well I know in Denmark they had a very simple way to deal with that.
The sales tax was charged all the time, and businesses simply subtracted
what they were charged in sales tax from what they had charged their
customers and paid the difference.  No exception issues for anyone to
worry about.  I hope the GST is handled more like that at least.

> The GST regimen changes that, and has actually changed the shape of
> retailing, because it got rid of this "don't want to sell to
> individuals" mentality.  It didn't do so *completely*, but I recall in
> my youth that there were a whole lot of businesses that refused to
> sell to the public, which seemed mighty unfair, at the time.
> 
> Tax policy is a lot more curious than it often appears...   For all
> that GST takes the brunt of a lot of public unpopularity, I think a
> HUGE dose of that comes from personal hatred of  Mulroney's government
> that enacted the legislation, as opposed to rational analysis of the
> effects of the policy.  (At the time, I watched, with amusement, the
> general irony that a whole lot of the policies he implemented were of
> a shape traditional to the Liberals, and the Liberals' noisy
> opposition used arguments characteristic of Conservative positions of
> earlier in the century.)

I think it would be more fair if given that the HST is adding PST to
a number of items that previously did not have it, then they should
remove PST from those items that are GST except (like used car sales).
But no, they don't want to loose that income, so the PST gets to stick
around for those.

-- 
Len Sorensen
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