Canadian Packaging

HST raising concerns for small business


September 28, 2009
by Purchasingb2b staff

Toronto—Small business owners are concerned about the impact the harmonized sales tax (HST) will have on their bottom line, according to a survey by the Canadian Federation of Independent Business (CFIB).

The report, called “Look before you Leap!” is based on responses from nearly 3000 business owners.

"Governments have clearly dropped the ball in their handling of this critical tax reform initiative," said Satinder Chera, Ontario director of the CFIB. “The decision to finalize the terms and conditions of the HST, without public consultation, has generated mixed reviews and serious concerns within Ontario’s small business community."

Among the potential benefits of the HST, 35 per cent of business owners pointed to a reduction in paperwork, while 22 per cent cited an increase in input tax credits.

But other small firms cite concerns. When asked which aspects of the HST will harm their business, 75 per cent of respondents pointed to the requirement to charge higher tax rates on their goods and services—a big negative for buyers.

Forty-four per cent anticipate subsequent growth in the underground economy.

In a letter to both levels of government, CFIB asked that the final agreement on harmonization include the following measures:

• A reduction in the combined tax rate;
• Retaining compensation for the tax collection efforts of merchants (firms currently receive a small amount for collecting Ontario’s retail sales tax)
•  Increasing the small business transition tax credit to match the cost of implementing the HST;
• The introduction of a strong fairness code for small business

"A win for consumers, such as a cut in the combined rate, would go a long way in building consumer and business confidence in this tax change," Chera added.

The HST is due to take effect July 2010.