Thursday, July 01, 2010

HST - Nothing but a RIP OFF

As of midnight last night, the Ontario Government has imposed a change on the way retail sales taxes are applied. Although the *amount* of the total sales tax remains the same, at 13%, just *what* that tax applies to has increased significantly.

As a small business (really a 'micro business' - employing a single person), the Wareham Forge has been made responsible for implementing, collecting, and returning this tax to the Government. Information on just what the exact provisions of this new tax structure by the Ontario Government have proved extremely difficult to determine. I was told to attend a *two day* seminar in Barrie (thats an hour's drive away). Although this seminar itself was free, the related costs of travel, lodging, food - much less two days lost production time - ALL would have come out of my pocket. Needless to say, I did not bother.

So far I have spent many hours on the (poorly designed) Government web site, followed up with more frustrating hours on the phone with badly trained operators. Again, I am expected to absorb all that lost time as well.

Last night I spent 3 1/2 hours re-working the Wareham Forge web site, implementing the changes required to add the new tax.

The Ontario Government has been informing the general public that this new tax structure will produce no significant changes in the overall costs to consumers. They talk about reduced costs to business, which they expect will be passed down to customers.

1) See Above. Multiply hours by the standard shop rate of $50. Who do you think should pay for that?

2) A number of things that were NOT SUBJECT to the old 8% Ontario PST are NOW SUBJECT to a full 13% HST. Before June 30, 2010, these things only had 5% GST applied. At the Wareham Forge this includes:
- Any object I personally installed (so all architectural works)
- All educational related products, which means all courses and DVD/CDROM

3) Under the old Ontario PST system, a small amount of the value of the taxes collected was returned to the business for the trouble and effort of maintaining those records on behalf of the Government. Under the new HST - this rebate has ended. So someone (guess who?) will now have to cover the hours spent on that record keeping.

The logic provided by the Ontario Government is that businesses will now be able to rebate ALL the sales taxes paid out as HST. Before June 30, this was the case for all 5 % GST amounts. Ontario 8 % PST was only rebated for certain types of purchases, primarily raw materials.
Now I just ran a very fast estimate on how much PST I paid out via the Wareham Forge for the first six months of 2010. Under the new regime, I would have been able to rebate an extra $123.

For the Wareham Forge, 'educational' related products and services are a major income component. The most significant change is the new requirement to apply the higher rate of the HST to ALL these. This will include training programs here at the workshop, educational programs at schools, demonstrations at museums and festivals.
A very significant change is the new addition of the HST to any work I personally install. These large value custom projects were considered 'capital investment' under the old system, and thus were only subject to 5% GST. After June 30, under HST, in effect an additional 8% must now be applied. And you can bet most people budget for the AFTER tax total when considering custom art metalworks.
Applied to the income of the Wareham Forge over the first half of 2010, the addition of an HST to all these areas would have resulted in an overall INCREASE to the customers of $431.

Compare the hard numbers:
Business cost reduction = $123
Overall increase in tax = $421
Net increase to consumer - $298


Now, there is another side to this. My own personal living costs. THOSE are not subject to any rebates. As EVERYTHING is now subject to 13% HST, there are a number of major monthly expenses which now cost us more. These are my estimates for the balance of 2010:
Gasoline - $100 per month (personal use portion) = $80
Electricity - (guesstimate) $1260 = $100
Satellite TV - $55 per month = $26
Fortunately, we pay our house insurance ($1000) as a yearly amount, in January. So for this year at least we beat the additional $80 added there.
Total increase to year end on 'fixed' costs = $ 206

'Transition Rebate' from the Ontario Government? Not a dam thing in MY mail box...

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February 15 - May 15, 2012 : Supported by a Crafts Projects - Creation and Development Grant

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