I read a piece of news today where here in BC there is going to be a new tax system called the Harmonized sales tax that is going to be introduced next year. For those who live in BC you can read the announcement here:
Essentially, right now we pay two types of taxes on the goods and services we buy and this method would eliminate that as everything will be under one tax. Logistically it sounds like a good idea. As well, based on what I read it can definitely help businesses when it comes to tax credits. Normally there are many purchases where one cannot claim provincial tax credit for as every tax is categorized differently. However, since this would make every tax under one umbrella that means you can claim credit for more things now.
However, from a consumer point of view I think this may be worst overall. Normally as a consumer there are a bunch of item types such as groceries that you donâ€™t have to pay a provincial tax on where the rate is six percent. You do have to pay a five percent federal tax though. So imagine normally a one dollar carrot would cost $1.05 after tax. With this new system, since there is only one combined tax everything will be charged an HST rate at twelve percent. So that carrot will now cost $1.12.
As you can see, this can definitely add up. Reading the link above did say there was suppose to be some kind of rebate credit though where in a sense you will have the same amount of money left in the end. Makes me wonder if it is like an end of tax year scenario where you have to keep your receipts. In those cases this would remind me of like a mail in rebate where most people wonâ€™t even go through the trouble to redeem it.
Another thing about this that made me wonder is how the literature is emphasizing that this is suppose to be a great way to boost the economy while creating jobs. Generally speaking though, you canâ€™t always assume that when a business saves money that they will necessarily re-invest it into something local. How do you know that the executive wonâ€™t spend it on a vacation elsewhere as an example?
Putting the self employed hat makes this sound fantastic. But if we are talking about overall impact I canâ€™t see how this is best overall.