Thursday, February 25, 2010

Happy Birthday Canada – Here’s Yet Another Tax Increase

Canada’s largest provincial government stuck their tax grabbing hands deeper into their residents pockets, and as of July 1, 2010, almost everything in Ontario will be eight percent more expensive.

When the Ontario government merges their provincial sales tax into the Harmonized Sales Tax (HST) – which is a combination of the five percent Goods and Services Tax (GST) and the eight percent Ontario Provincial Sales Tax (PST) many items currently only subjected to the GST will suddenly be taxed provincially as well. All of this takes place when the new combined HST takes effect, on Canada’s birthday -- Canada Day -- July 1.

The Ontario government claims this combining of the two taxes will result of in a cost savings for both the federal and provincial governments in terms of administering the taxation system. And if you check out the provincial government’s website, they are trying to sell this tax increase as a tax decrease for Ontarians – just how dumb do they take us for?

However easier it may or may not be for the government to administer, this is clearly a tax grab for the Ontario government, as the harmonization of the two taxes really adds up when you consider all the things we consume which previously weren’t taxed by the province – but will be once the new HST takes effect.

Some of these higher prices will affect all of us all indirectly. Gas prices will skyrocket by the additional provincial portion of the HST by eight percent on July 1 – which directly affects everyone who drives in Ontario.

Almost everything you pick up off a store shelf comes to that store by truck. An additional eight percent price jump may occur, to offset the additional fuel costs spent to bring those goods to market. This is in ADDITION to any other taxes, because they are the result of an additional tax being levied on fuel, which will directly result in an increase in the cost of getting goods to market.

And you think the trucking companies are going to pay for that? Think again. They will charge more to transport – say groceries such as apples and oranges to your local grocery store. The grocery store in turn, will have to charge more to recoup their costs, so the price of apples and oranges will increase. Even though the cost of apples and oranges themselves did not directly increase by the HST – basic groceries are exempt from the provincial portion of the HST in Ontario.

Dalton McGuinty, Ontario’s Premier says the HST will affect a mere 17 percent of consumer purchases. However, McGuinty is only looking at what the HST is directly affecting – he’s failed to include all the indirect costs associated with his tax grab, such as the cost to get apples and oranges to market.

Previously not taxed provincially, the following items will jump by eight percent automatically when the HST takes affect:

  • Electricity
  • Gasoline
  • Heating Fuels
  • Internet Access Fees
  • Personal Services (e.g., Hairstyling)
  • Professional Services (e.g., Legal, Accounting and Real Estate Fees and Commissions)
  • Tobacco

Many of these combine to give you a double-whammy effect – computers use electricity to run so that we can check our email and surf the Internet. Electricity and Internet access fees are both increasing by eight percent each under the HST. Suddenly, your lone computer sitting in the corner costs you an additional 16 percent in taxes just to operate!

A ten dollar haircut will jump to a thirteen percent HST – meaning you’ll now pay $11.30 for that ten dollar trim.

The Ontario Ministry of Finance estimates the typical Ontario home owner will pay an additional $100 per year for electricity and about $125 per year for natural gas heating.

Businesses need electricity and heat as well, and as their operating costs increase thanks to increased electricity and heating fuel costs, they will naturally pass these operating costs onto us consumers, so even products exempt from the provincial portion of the HST will in the end, cost more.

All of these costs come just as the world is starting to come out of the worst economic depression since the Great Depression of the ‘Dirty Thirties,’ so as many of us are still reeling financially, the Ontario government socks us with a hefty right-hook, punching us with another new tax.

Wonderful. Maybe just as we’re getting up from the mat, the McGuinty government will pour some salt in our wounds to remind us of their fiscal sting with new user fees implemented for services which were previously already paid for by our taxes. Oh, they are going to do that too this year?

Welcome to Ontario – yours to discover – as the local license plates say.
Justify Full

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