Why I Loath the HST

in Case Study, HST

My guess is that the Harmonized Sales Tax is a necessary evil, but I still can loath it, and I have a specific area that upsets me to no end, and that is the HST has the potential to be a non-linear revenue growth in the area of Gasoline.

For those of you have not looked closely, the price of Gasoline is already highly influenced by the taxes put on by various levels of Government. The following graphic from the CAA outlines just how much we pay in taxes on Gas already:

These numbers are all approximate now, but given the HST now adds PST on top of these taxes it asks an interesting question, When is the HST/PST tax charged on the price?

From June 30th to July 1st in Ottawa gas prices went from 94 cents a litre to $1.02 cents a litre. That seems a bit of a large jump given my understanding is the 8% increase should have been on the CRUDE COSTS+Profit+Refining costs of Gasoline, not on top of the other taxes that are already in place, however, this does not seem to be the case.

As an example if Gasoline costs 43 cents before all of the added taxes, the HST should only add about 3.4 cents more to the price, but this does not seem to be what is happening. What seems to be happening (in my opinion) is that the HST/PST is being added ON TOP OF the other taxes on our gas. This means that the revenues from the HST/PST portion is from Taxes already charged?!?

This could mean that if the Federal Government increases their Transport Tax on Gas, or worse invokes a “User Tax” on Gas of 10 cents more a litre, does the new HST/PST grab another 8/10 of a cent from this increase? If so this is dirty pool on all levels of government, since they are Taxing, Taxes, and can increase their income by announcing only 1 tax increase when in fact there are TWO that come into play.

Anybody care to set me straight on how this should all work, please go ahead, I am willing to say I have got it wrong, but I don’t seem to be.

{ 17 comments }

  • Mark July 8, 2010, 5:04 PM

    I lived in New Zealand when the GST was introduced in the mid 80s. I loved it because my marginal income tax rate was cut from 66% to 30% (figures from memory) on the same day.

    A few years later I happened to be in Australia when they brought in their version of the Gst. No great dramas as sales tax/tariffs on numerous items were cut or eliminated at the same time.

    In Ontario, the HST is being accepted to some extent because the government is cutting tax in other areas at the same time as a partial compensation.

    I have the misfortune to be living in BC this month where our premier unwisely brought in the HST with absolutely NO compensation in other areas. According to him, despite the tax rate jumping to 12% and hitting a larger number of items, we are somehow miraculously going to all save money because of the HST. Is it any wonder no one believes him?

    Reply
    • bigcajunman July 8, 2010, 5:13 PM

      Ooops, interesting to not make some exemptions to make the tax more paletable.

      Reply
  • Ghostryder July 6, 2010, 10:12 PM

    “2Hirondelles Says:
    July 6th, 2010 at 8:11 AM
    I snorted with laughter when I heard that the government ‘hoped that the retailers would pass their savings from easier administration of the HST on to consumers’. Right. As if that’s likely to happen, ”

    ’cause busineses NEVER compete with one another on price, right?

    Reply
  • 2Hirondelles July 6, 2010, 8:11 AM

    I snorted with laughter when I heard that the government ‘hoped that the retailers would pass their savings from easier administration of the HST on to consumers’. Right. As if that’s likely to happen, much less at the pumps, because the oil companies are greedier than the rest.

    @DDukes: all the incentive one needs to change one’s behaviour re: consuming oil is contained in Aftermath: World Without Oil, by National Geographic. Saw it last week. Interesting, to say the least.

    Reply
    • bigcajunman July 6, 2010, 8:21 AM

      Do I need to start a BookShelf on the site of good Books?

      Reply
  • David Dukes July 5, 2010, 9:17 PM

    I wouldn’t expect the prices at the pump to change much even after the long weekend. I don’t know if a high gas price is really much of a deterrent that will make people stop driving. We need incentives to make us feel as if we’re gaining, or even losing out on something if we don’t get it, in order to alter behaviour. Where are the organizational behaviour specialists?

    Reply
  • Susan July 5, 2010, 3:14 PM

    It’s a price hike, not a tax hike. The gas stations know what the “market will be bear” and price accordingly. Goods and Service companies that charge HST now get tax breaks from the input costs of their services or goods sold. This was to avoid double taxation of companies paying taxes on widgets all the way up the production line and then to the consumer. Now they allow the corporations to get those “input taxes back”, and instead collect one lump some at the end of the line. So there is no need to charge more for the goods, because on an after tax basis their profit margin remains the same. It is meant to be a wash.

    They get away with it, because generally, most people don’t know the nitty gritty details of taxes.

    When the GST went from 7% to 5%, how many things went down in price by 2%…not much.

    Reply
  • Andy R July 5, 2010, 8:51 AM

    You are absolutely right about the tax-on-tax. The Canadian Taxpayers Federation puts out a report for their Gas Tax Honesty campaign. The report explains the double taxation and a whole lot more. See the 2010 report at the following link:

    http://www.taxpayer.com/sites/default/files/GTHC_May2010.pdf

    Tax me, I am Canadian, eh!

    Reply
    • bigcajunman July 5, 2010, 9:52 AM

      Additive taxes are one thing, but multiplicative ones just burn my corn!

      Reply
  • Beth July 5, 2010, 8:11 AM

    Don’t prices always go up on long weekends and holidays? I think this week will be a better indication of prices.

    Reply
    • bigcajunman July 5, 2010, 8:22 AM

      No, because I have no idea what Gasoline should cost. It would be nice if the Gas Station was forced to show you the actual price of Gasoline, as well, so then I could know for sure how much I am spending on Gas, and how much on Taxes.

      Reply
  • Michael James July 5, 2010, 7:47 AM

    Call me cynical, but I’ve seen that Gas Price Pie many times and I always just assumed that it was the result of creative accounting. Is that 2% profit the profit for the gas station or for the oil companies? Does the 35% taxes include income taxes on oil company profits? Is the pie a snapshot in time that looked most favourable for the message that whoever created it wanted to deliver? The last I checked, oil companies don’t seem to be starving.

    Reply
    • bigcajunman July 5, 2010, 8:21 AM

      No, not many starving Oil Companies. I think the “pie” is a marketing tool from the Oil companies to show how cheap Gas can be, if the Government stopped taxing it.

      Reply
  • youngandthrifty July 5, 2010, 1:30 AM

    Ugh.. tell me about it!

    We actually have another tax on top of all the other taxes we pay for gas too, here in BC.

    We pay (right now) about $1.16 a litre- I think this is the highest in all of Canada, thanks to the environmental tax.

    They added it in hopes that it would hinder people from getting behind the wheel- and I don’t think it really has.

    Reply
    • bigcajunman July 5, 2010, 4:59 AM

      Hope it is not the case (that this is a Tax ON a Tax), but I suspect it either is, or the Gas companies are taking advantage of this as well.

      Reply

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: