Now that we have had the time to try out the HST system, I have to admit that I like it. I am not a big fan of taxation but can see some definite advantages for farmers and small businesses. Now that the government has sweetened the pot by promising a reduction of 2% in the provincial portion, there is even more to consider before voting in the referendum.
Before HST, farmers had to deal with two tax agencies. All farmers who had farm tax status which allows for a property tax reduction, were declared "bona fide" farmers by the provincial government. These farmers could have a PST exemption on certain farm inputs, and this exemption was usually declared at the point of purchase. Quite simple, but you had to either have your farm card on you, or have your farm business and farm number on file with the seller. Some farmers would also be federally registered, with business numbers that would allow them to file GST. Since food products are tax exempt and no PST or GST is charged to the buyer, the end result would be a benefit to the farmer who would file the Input Tax Credits and receive a refund from the federal government. The list of allowable input items was different for each agency, with the federal government allowing a greater number of tax exempt items.
After HST replaced the GST-PST system, the whole procedure was streamlined with the farmer able to claim input tax credits on more items. For farmers who are enrolled in both provincial and federal systems the HST system is better. For small farmers who are not enrolled federally and do not claim the input tax credits, the PST exemption at point of sale was lost. Farmers who are not enrolled in HST would need to do so in order to benefit from the changed tax structure.
For small businesses, before HST the provincial PST system required collected and collectable provincial taxes from sales to be in government hands each month, three weeks after the end of the month. The government didn't care if you couldn't collect from all your customers by that time. Businesses would register with suppliers so that they could be exempted from the PST on their inputs. Not everything would be charged PST - some sales items like services, trucking, most food, etc. were not charged PST. PST was at 7% in BC for the last several years. GST has been reduced from 7, to 6, and finally to 5% over the last few years.
The new HST system is just like the GST system, except now the PST is added on so the HST is 12%, and will be reduced over time to 10% due to the increased efficiencies in collecting the tax.
What some people don't appreciate is that most small businesses collect taxes from their customers and hand the taxes over to the government. Small business works for the government in this way, and although it sounds simple when stated like that, it involves collecting taxes for the government, filling out paperwork, filing the paperwork on time, dealing with audits, and keeping up with the rules and regulations. For businesses that charge both PST and GST, the HST system is more streamlined.
For businesses that are service oriented and have not charged PST in the past, the change to HST has an immediate impact on both the customer and the business with an increase in prices to the end user. I can see that one downside for local farmers will be to those who sell directly to restaurants. The restaurants will still have the benefit of major inputs (food) that do not have any HST attached. However, the restaurants will also have the downside of charging HST on meals and may see business reduced or margins slimmed, and may try to have farmers drop their prices, or may bypass local food suppliers altogether and go with a cheaper source of food.
As farmers, we are also consumers, so there is that part of the puzzle to ponder. The months we have had the HST in operation has given us an idea of its impact on our daily lives. . The government website and the easy to read report have been helpful to me, and I recommend everyone to give it a look and decide for yourself.
Before HST, farmers had to deal with two tax agencies. All farmers who had farm tax status which allows for a property tax reduction, were declared "bona fide" farmers by the provincial government. These farmers could have a PST exemption on certain farm inputs, and this exemption was usually declared at the point of purchase. Quite simple, but you had to either have your farm card on you, or have your farm business and farm number on file with the seller. Some farmers would also be federally registered, with business numbers that would allow them to file GST. Since food products are tax exempt and no PST or GST is charged to the buyer, the end result would be a benefit to the farmer who would file the Input Tax Credits and receive a refund from the federal government. The list of allowable input items was different for each agency, with the federal government allowing a greater number of tax exempt items.
After HST replaced the GST-PST system, the whole procedure was streamlined with the farmer able to claim input tax credits on more items. For farmers who are enrolled in both provincial and federal systems the HST system is better. For small farmers who are not enrolled federally and do not claim the input tax credits, the PST exemption at point of sale was lost. Farmers who are not enrolled in HST would need to do so in order to benefit from the changed tax structure.
For small businesses, before HST the provincial PST system required collected and collectable provincial taxes from sales to be in government hands each month, three weeks after the end of the month. The government didn't care if you couldn't collect from all your customers by that time. Businesses would register with suppliers so that they could be exempted from the PST on their inputs. Not everything would be charged PST - some sales items like services, trucking, most food, etc. were not charged PST. PST was at 7% in BC for the last several years. GST has been reduced from 7, to 6, and finally to 5% over the last few years.
The new HST system is just like the GST system, except now the PST is added on so the HST is 12%, and will be reduced over time to 10% due to the increased efficiencies in collecting the tax.
What some people don't appreciate is that most small businesses collect taxes from their customers and hand the taxes over to the government. Small business works for the government in this way, and although it sounds simple when stated like that, it involves collecting taxes for the government, filling out paperwork, filing the paperwork on time, dealing with audits, and keeping up with the rules and regulations. For businesses that charge both PST and GST, the HST system is more streamlined.
For businesses that are service oriented and have not charged PST in the past, the change to HST has an immediate impact on both the customer and the business with an increase in prices to the end user. I can see that one downside for local farmers will be to those who sell directly to restaurants. The restaurants will still have the benefit of major inputs (food) that do not have any HST attached. However, the restaurants will also have the downside of charging HST on meals and may see business reduced or margins slimmed, and may try to have farmers drop their prices, or may bypass local food suppliers altogether and go with a cheaper source of food.
As farmers, we are also consumers, so there is that part of the puzzle to ponder. The months we have had the HST in operation has given us an idea of its impact on our daily lives. . The government website and the easy to read report have been helpful to me, and I recommend everyone to give it a look and decide for yourself.
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