Tag Archives: Gst

Tax breaks

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The statistics show that across Canada, fewer rental units are being built compared to the 1970s, a time of prosperity and growth, fuelled by an influx of boomers looking for apartments. The facts also show the dramatic dip in rental-housing construction coincided with tax reform that cut the amount of capital costs investors could use to reduce income.

Investing in rental property became less attractive. Now developers and affordable-housing advocates are lobbying for a return to the pre-reform tax policies of the early 1970s to spur construction of lower-rent accommodation. But they also want a variety of other tax breaks, including reductions in GST and PST expenses.

Tax reform in the 1970s reduced the amount of a building’s capital cost, whether new or purchased, that could be deducted from investors’ incomes. Today, investors can deduct four per cent, compared to as much as 10 per cent pre-1972. Rental property once could be pooled as a portfolio to maximize the benefit of deductions, but no longer. The federal government has also restricted which investors can use “excess” capital cost allowances to reduce other income.

The federal and provincial governments have begun funding affordable-housing construction again, but this is an expensive way to expand the rental market. The Harper government should consider re-instituting the pre-1972 incentives — giving GST and PST breaks to specific interests sends governments down a slippery slope lined with numerous worthy causes.

http://www.winnipegfreepress.com/opinion/editorials/tax-breaks-133944998.html

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Release the HST analyses

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The leaders of Manitoba’s opposition parties are correct to be concerned that a proposal to blend the GST and PST into a single harmonized sales tax could prove to be nothing more than cash grab by a Doer government desperately seeking lucre. But that said, why throw the baby out with the bathwater? Why not see the proposal as an opportunity and formulate a better alternative outcome? Why not, as the Free Press argues, harmonize the taxes and dedicate increased revenues to a fund that would reduce municipal infrastructure deficits and create property tax savings?

One reason Conservative Leader Hugh McFadyen and Liberal Leader Jon Gerrard might not be articulating alternatives were underlined by Mr. Gerrard. He noted that Finance Minister Greg Selinger has been looking at the issue for a decade and must by now have an extensive file on HST, and a thorough analysis of the impacts that would result from harmonization. Mr. Selinger should release that analysis so that an informed and reasoned debate can take place. In the absence of the information, it is understandable that critics — and those are lining up more on the left than the right — will leap to irrational conclusions. Continue reading →

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Reflections on the 2008 Canadian Tax Year

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Whether it is considered a welcome break or a hollow gesture, the federal government’s GST cut to five per cent took effect Tuesday with little fanfare and few complaints from retailers who collect the tax.

The government estimates that cutting the tax one percentage point will save Canadians $6 billion, which will flow back to them a few cents at a time, depending on the size of their purchases, adding up to about $150 to $200 per household each year, according to the Canadian Taxpayers Federation.

For big retailers like Future Shop, the change was a simple computer-system change, which gives their customers a break on the prices they’re paying.
Prime Minster Stephen Harper promoted the five-per-cent GST as part of his last election campaign.
Prime Minster Stephen Harper promoted the five-per-cent GST as part of his last election campaign.
J. P. Moczulski, Reuters
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“I would say consumers will be happy [about the cut],” Ram Manaktahla, general manager of the Future Shop outlet at Robson and Granville streets in downtown Vancouver said.

“Think of all the products customers [are buying]. From iPods to digital cameras, flat-screen televisions, laptops, notebooks — they’re saving one [percentage point] on all of them.”

Vancouver-based retail consultant David Gray added that the first stage of the Conservative government’s GST cut, from seven per cent to six per cent which took place July 1, 2006, went relatively smoothly for retailers, “so I think they know the drill.”

“The complaint of retailers is they’re essentially taking on the job of tax collector without a lot of support and basically no thanks,” Gray said. Whether the tax fluctuates, he added, is less of an issue.

However, government critics counter that cutting the consumption-based GST may mean little for average Canadians.

“Those with the highest salaries — the millionaires, the big banks, the [profitable] corporations … The ones that don’t need the help are going to get the most help,” from the GST cut, said federal NDP leader Jack Layton.

He added that average families may also see higher property taxes, post-secondary education fees and other bills.

Patricia Croft, chief economist with the investment firm Phillips, Hager & North, said anyone making big-ticket purchases will benefit from the consumption tax reduction.

However, she added that “in general, most economists would prefer a cut in income taxes. It’s a more efficient way to reduce the tax burden.

“By cutting the GST, hopefully it causes Canadians to spend more.”

The GST savings amounts to about $2 on the purchase of a $199.99 iPod MP3 player, $100 on a $10,000 home-theatre system or $300 on a $30,000 automobile.

Manaktahla said Future Shop gave its Christmas-season customers a jump on the GST break by knocking the percentage point off its prices starting Dec. 28. Customers who made purchases up to 30 days before that date could claim the reduction under the store’s “price-protection” guarantee.

Consumers need to be wary, however, to make sure they are getting full benefit of the cut, especially since the transition is occurring over the Christmas shopping period, according to tax expert Beverley Gilbert.

Gilbert, a chartered accountant and national tax-practice leader for the law firm Borden Ladner and Gervais, said people going to stores in January to return gifts purchased in December need to keep a close eye on their receipts to make sure they are credited for the full amount of GST that was paid on the gift in the first place.

Gilbert added that homeowners who take possession of new houses after Jan. 1 will get a GST break, too, but they will have to apply to the federal government for a rebate instead of seeing it knocked off the purchase price in their builder’s contract.

Consumers who have leased cars or other property should also see the GST cut in their payments, Gilbert added, even if they signed leases prior to Jan. 1.

John Williamson, national director of the Canadian Taxpayers Federation, however, defended this second trim in the GST.

Despite the criticisms, Williamson said the GST reductions from seven per cent to five per cent are broad-based measures that put, by his estimate, $10 billion a year back into people’s pockets.

“This is good news, particularly since $10 billion in the pockets of Canadian consumers is preferable to Ottawa hoarding the cash,” Williamson said.
Despite the criticisms, Williamson said the GST reductions from seven per cent to five per cent are broad-based measures that put, by his estimate, $10 billion a year back into people’s pockets.

“This is good news, particularly since $10 billion in the pockets of Canadian consumers is preferable to Ottawa hoarding the cash,” Williamson said.

http://www2.canada.com/vancouversun/news/business/story.html?id=34b943f3-2a71-422f-b676-10f1b85b4c7a&k=87417

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2008 GST Reduction Was Not Universally Praised

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“I came to this very store and promised Canadians that a new Conservative government would cut the GST from seven to six to five per cent and at midnight tonight we will deliver on that promise, three years ahead of schedule,” he said at a photo opportunity in a Mississauga store Monday.

Harper said this latest cut will result in an additional $6 billion in tax relief for Canadian consumers in 2008.

But NDP Leader Jack Layton said the GST announcement and other Conservative tax cuts will do little to increase wealth in Canada. In an end-of-year interview, Layton noted that the tax cuts could widen the gap between rich and poor, while the average family could see higher property taxes, post-secondary education fees and other bills.

“Those with the highest salaries – the millionaires, the big banks, the (profitable) corporations… The ones that don’t need the help – are going to get the most help; the oil and gas companies in the tar sands, continuing to get subsidies as well as a big boost from the corporate tax cuts,” Layton said.

Patti Croft, chief economist with the investment firm Phillips, Hager and North, said anyone making big-ticket purchases will benefit from the consumption tax reduction. But, she said: “In general most economists would prefer a cut in income taxes. It’s a more efficient way to reduce the tax burden. By cutting the GST, hopefully it causes Canadians to spend more.”

Ottawa realtor Duane Leon, however, predicted that even though the cut could shave thousands of dollars off the price of a newly built home, there would be little impact on the real estate market. Many builders have already announced that price increases in the thousands of dollars for new construction that will take effect early in the new year, he said, adding this will offset any benefits to buyers from the GST reduction.

The only buyers who will see an actual one per cent price drop in the purchase price of a newly built home are those who bought in 2007 and take possession in 2008, said Leon, an agent with RE/MAX Metro-City Realty. GST is not charged on resales of existing properties.

The director of the Canadian Taxpayers Federation, however, defended this second trim in the GST, saying it will save the average household between $150 and $200 annually.

“While some have criticized cutting the GST, it is a broad-based tax cut that puts $5 billion back in the pockets of over-taxed Canadians,” John Williamson said in a statement. Noting that this is the second GST cut that the Tories have made since July 1, 2006, he added: “This is good news particularly since $10 billion in the pockets of Canadian consumers is preferable to Ottawa hoarding the cash.”

The president of the Canadian Federation of Independent Business agreed.

“The one percentage point cut puts over $5 billion dollars back into the national economy, at a time when sales are traditionally sluggish in many sectors,” said Catherine Swift.

“Our members’ No. 1 priority is tax reduction of all kinds,” she said. “They want to see more money left in Canadians’ pockets.”

The Goods and Services Tax was introduced by the Conservatives in 1992. All 10 premiers opposed the tax, lobby groups railed against it and one poll showed 80 per cent of Canadians objected

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