Cyndee Todgham Cherniak is counsel in international-trade law and commodity taxes at law firm Lang Michener LLP. She doesnt like the way the Harmonized Sales Tax (HST) overcharges consumers and businesses when they buy certain items.
The HST replaced federal and provincial sales taxes recently in Ontario and B.C. because provincial sales taxes are cascading taxes, i.e. they collect taxes on taxes. It appears the HST has a similar problem with respect to the supply of certain goods and services. As Ms. Todgham Cherniak writes in The HST Blog:
I think that consumers are paying GST/HST on top of many taxes and fees when the GST/HST laws do not require GST/HST to be charged.
Heres the situation: the Taxes, Duties and Fees (GST/HST) Regulationscontain a list of taxes and levies that are excluded from the price of goods and services for the purposes of calculating GST and HST. For Ontario, it is a small list, comprised mostly of the Land Transfer Tax Act. Taxes not on the list are included in GST/HST calculations.
The various taxes allowed in the calculation of GST/HST might be grounds for complaint in the eyes of many taxpayers. But there is a new development that particularly concerns Ms. Todgham Cherniak. And that is new taxes that are not included in the list of exemptions when they perhaps should be included.
This results in consumers and businesses being overcharged on HST since new taxes appliedon particular goods and services raise their prices and, in turn, the amount of HST collected by the government. She argues:
The unfortunate reality is that the implementation of HST has incentivized Ontario and British Columbia to cause prices to increase so that they get more HST revenues. It is in the interest of the government for retailers and suppliers to make mistakes and overcharge consumers. It is no longer in the interest of Ontario and British Columbia to list new provincial levies in the Taxes, Duties and Fees (GST/HST) Regulations.
She adds: I have serious questions whether the Toronto plastic bag fee is subject to HST. I have serious questions whether GST/HST should have been charged on top of the ecotaxes. I have questions whether certain destination marketing fees [charged by hotels] are subject to GST/HST.
There are other cases of taxes on taxes, such as the LCBOs mark-up fee. LCBO is government owned, so its mark-up, well over 50% on many product lines, is effectively a tax. The HST on alcoholic beverages is therefore a cascading tax, declares Ms. Todgham Cherniak.
When it comes to situations where the HST is a cascading tax, it is more important than ever for businesses and retailers to understand the law and force governments to follow the law, recommends Ms. Todgham Cherniak. It is more important than ever for people to make it known that there is a cascading tax and the government is accountable to them and needs to request the new tax to be listed.