Thursday 30 April 2009
An Email from the Website about taxation.
This comment is not anonymous to me.
From: < .... >
To: evelynb@aci.on.ca
Sent: Wednesday, April 29, 2009 6:37 PM
Subject: An Email from the Website
Evelyn, Who is this Robert the Bruce character , Does he honestly believe that the manufactures and sales outlets will reduce their prices , I cannot believe the naivety of people , where was Robert when Chrétien promise to abolish the Mulroney GST and where was he when that pxc&% conned everyone into thinking the manufactures and home builders and every other Tom Dick and Harry would lower their prices because they were no longer subject to the federal manufacturing taxes , the only tax relief anyone gets is either by cheating on their taxes or working for cash under the table. and this government is doing everything it possibly can to promote this underground trade.
This Out of Harmony tax is nothing but an absolute disgrace and will be the final nail in the Liberals Coffin , they just cannot continue to lie repeatedly to the public , they must go, I wish Robert all the best in his dream world of tax reform, one day he will realize the nightmare that it is. Keep up the good work of telling it like it is !!!
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5 comments:
Gee Heather, thanks for this letter. I am glad to see one of my secret admirers posting on the blog. :-)
But seriously folks..... Do I honestly beleive manufacturers and sales outlets will reduce their prices? I beleive that some, if not most manufacturers will. Retail operations, again most reputable ones will. Some will try to take advantage of the consumer.
Without trying to get political as my friend here has, I will try to explain some simple pricing economics. I am by no means a economist, but I understand business practices enough. Of course, all of the numbers are fictious.
Prices at the wholesale and retail levels are usually based on a percentage of cost. If the total cost for an item costs a manufacturer $10 and they use a markup factor of say 25%, they sell the item to their wholesale customer for $12.50. Their customer is also charged 8% PST (unless they have an exemption, and I am not going to get into that). So, this customer now pays $13.50. So, the wholesaler, sells the $13.50 product to their customer with their markup of 25% and now we have an item that costs $16.87, but then they have to charge GST and PST, so the total cost to the consumer is $19.07.
So, under the new tax structure, that same $10.00 item is sold to the wholesaler for $12.50 (the markup). The wholesaler has to pay 13% in GST and PST ($1.62) BUT they claim that cost back from the government and they essentially pay $12.50 for the item. SO now, the cost of the item is $12.50 plus their 25% markup for a cost of $15.62. They sell that item to the consumer with HST and the consumers' cost is now $17.65. A difference of $1.42.
So you can see that the theory that I subscribe to is valid. Like I said, I do not expect every company to pass along the savings. I also don't expect this to happen overnight, costing takes time to work through the system, depending on whether a company uses actual costs vs. average costs vs. standard costs. Consumer demand will dictate the market place. For those companies that are proactive in their costing models, they will see their sales increase as consumers go to them.
As far as the statements in this letter about "final nail in the coffin...." etc. we heard all of the same stuff when the PCs brought GST in the first place. It was a hot issue, Cretein hung his hat on it's demise, and yet we still have it and there is nothing that they have found that is any better. Underground economy.... yes, you can get your driveway paved or roof done or a fence made by paying cash. But I don't think that HST will make that any more prominent.
So, I may be living in a "dream world" but at least I have made a statement with facts to back me up rather than hyperbole.
Here endith the lesson....
Fuimus
Robert The Bruce - you mentioned being PST exempt... my basic understanding of how that works is that if you're PST exempt as a business, it only holds for goods that are for RESALE.
I think the rule is that the 'end user' doesn't pay PST more than ONCE... so if your wholesaler buys a lamp for $12.50, and the wholesaler sells it to the Lamp Store for $15.00, only the Lamp store can add the PST to the price.
Heather, I beleive that you are fundimentally correct about PST exemptions. However, the exemption is to the purchaser of the item. The seller of the item must charge PST unless the buyer has a PST exemption license.
I tried to stay away from exemptions in my original post to demonstrate the incremental costs of the existing taxation structure.
Of course, in my example I am sure that a PST license would be used at some point. However, other things that the retailer purchases as part of "doing business" that contain PST cannot be exempt (ie. office supplies, equipment, etc.). The PST component of those costs must be passed along to the customer under the existing system as that makes up the "cost of sales" line of their P&L. Under harmonization, the HST of ALL business related purchases become an in and out entry on the P&L and the cost need not be passed along to the final consumer.
Again, I am not an economist nor accountant. I am a lowly IT consultant that has written software for business since 1981. The PST structure in Ontario is very flawed and confusing. Even the services that I provide to clients can be PST taxable or non-taxable depending on what I am doing and on what software / hardware. Any improvement to the structure would be a good thing, and I still believe that HST is an improvement.
Fuimus
Robert the Bruce is an IT consultant who lives in the South West quadrant of town, who has a child who attends Highview. Has a dislike for the councillor who lives in their area
Revels in Robert the Bruce lore and legend.
See you in the Metro!
"Robert the Bruce is an IT consultant who lives in the South West quadrant of town, who has a child who attends Highview. Has a dislike for the councillor who lives in their area
Revels in Robert the Bruce lore and legend.
See you in the Metro!"
I don't particulary care who he is - I like that he says what he thinks. I like the fact that he uses a pseudonym instead of just posting as Anonymous!
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