Is PST/GST Harmonization more like a "Same-Tax Union" or a "Single Payer, One Tier System"?
Dear Von & Maureen,
(& a few cc's)
I read the OREA letter re: Ontario's possible PST/GST Harmonization and it got me thinking ... should we examine this choice of tax methods as we did the Same-Sex Marriage issue or the debate over private vs public Healthcare provision? -i.e. one size fits all, has economies of scale, but has real-world problems that befuddle the best intentions of any legislation.
It's hard to assess all the ramifications of a PST/GST "Same-Tax Union" without knowing the exact details (although looking to other "harmonized" jurisdictions IS a pretty good predictor of how the gnomes & publicans in gov.on.ca will proceed).
In principle, I support harmonization for two reasons - it's simpler to have one rate and logic dictates that on a "broader base" that single rate can be lower than the former combined two and still produce the same revenue.
The real tricky aspects are 1) the Value-Added element of the GST that the PST does not have and 2) the politics of what goods/services are "exempted" and/or "zero-rated".
If this Value-Added concept is still "vital to keep our exports competitive" (as we were told when the Manufacturer's Sales Tax was phased out), then perhaps the harmonized tax will have to be a Value-Added Tax (VAT) too. To me the fact that another province as harmonized as a VAT makes no difference - until now Ontario (and others) are not full-VAT
and Alberta (currently) has no PST - we should have the BEST system, whether it "matches" or not.
It is a shame if we must have a Same-Tax Union as a VAT ... because the GST with its "grossed-up" cash register rate (that contributes to "sticker shock" at the checkout) and its added-but-not-compensated expenses/aggravation for goods/service providers in calculating their Input Tax Credit claims (averaging about 50% of the grossed-up amount Canada-wide) means that the ultimate consumer pays a much higher cash register rate higher than it need be (while everyone down the supply chain collects Input Tax Credits offsetting the Grossed-up tax they have paid.
If we think as we do re: Healthcare and in this case consider that the Single Payer within a One Tier tax system is the consumer ... then lowering the real cost "to the single payer" (at the cash register AND at the Personal Income Tax wicket) should be the paramount objective of the harmonization.
If absolutely every good & service had that harmonized tax applied AND the input credit system was eliminated, logic says that on both counts (broader base, no inputs) the rate could be reduced - perhaps by as much as one-half ... and if this IS the case the harmonization would be very easy for consumers to adjust to.
While they might be paying the Harmonized tax on somethings that were formerly exempted/zero-rated, they'll be paying a far lower rate at the cash register on a wide variety of products/services.
Yours truly,
rce
(& a few cc's)
I read the OREA letter re: Ontario's possible PST/GST Harmonization and it got me thinking ... should we examine this choice of tax methods as we did the Same-Sex Marriage issue or the debate over private vs public Healthcare provision? -i.e. one size fits all, has economies of scale, but has real-world problems that befuddle the best intentions of any legislation.
It's hard to assess all the ramifications of a PST/GST "Same-Tax Union" without knowing the exact details (although looking to other "harmonized" jurisdictions IS a pretty good predictor of how the gnomes & publicans in gov.on.ca will proceed).
In principle, I support harmonization for two reasons - it's simpler to have one rate and logic dictates that on a "broader base" that single rate can be lower than the former combined two and still produce the same revenue.
The real tricky aspects are 1) the Value-Added element of the GST that the PST does not have and 2) the politics of what goods/services are "exempted" and/or "zero-rated".
If this Value-Added concept is still "vital to keep our exports competitive" (as we were told when the Manufacturer's Sales Tax was phased out), then perhaps the harmonized tax will have to be a Value-Added Tax (VAT) too. To me the fact that another province as harmonized as a VAT makes no difference - until now Ontario (and others) are not full-VAT
and Alberta (currently) has no PST - we should have the BEST system, whether it "matches" or not.
It is a shame if we must have a Same-Tax Union as a VAT ... because the GST with its "grossed-up" cash register rate (that contributes to "sticker shock" at the checkout) and its added-but-not-compensated expenses/aggravation for goods/service providers in calculating their Input Tax Credit claims (averaging about 50% of the grossed-up amount Canada-wide) means that the ultimate consumer pays a much higher cash register rate higher than it need be (while everyone down the supply chain collects Input Tax Credits offsetting the Grossed-up tax they have paid.
If we think as we do re: Healthcare and in this case consider that the Single Payer within a One Tier tax system is the consumer ... then lowering the real cost "to the single payer" (at the cash register AND at the Personal Income Tax wicket) should be the paramount objective of the harmonization.
If absolutely every good & service had that harmonized tax applied AND the input credit system was eliminated, logic says that on both counts (broader base, no inputs) the rate could be reduced - perhaps by as much as one-half ... and if this IS the case the harmonization would be very easy for consumers to adjust to.
While they might be paying the Harmonized tax on somethings that were formerly exempted/zero-rated, they'll be paying a far lower rate at the cash register on a wide variety of products/services.
Yours truly,
rce
posted by Walk a Kb or Two in my cassins | 3:40 pm
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