Sunday, August 22, 2010

Thoughts on the HST and politics

A old friend of mine that I had not seen in over 40 years came over to visit the other day. He now lives in England and we reconnected through facebook. Social media is an interesting media to explore. We talked of old friends, caught up on each others life stories and reconnected in a pleasant and meaningful manner. When we were young we were both involved in the political process and started the first New Democratic Party club at Simon Fraser back in Winter of 1966. He has continued to be involved in the political process and is a high ranking member of his Local Labour Party in London.

I dropped out of being involved in politics both provincial and federal back in the 1970's when I worked  in a local riding and found that the in-fighting and back stabbing that goes on in political parties was not worth my time or energy. I doubt if anything has changed over the years, so I am not ready to give my time or talent to any political party. However, in BC we have a corrupt government that is ignoring the will of the people and corrupt newspapers that print only the conservative/right wing party talking line.  I follow the bloggers on the left who are not afraid to speak up for the truth and I would urge all of you to consider following these people who are the true hero's for the working families of BC.  These bloggers are working hard on your behalf to get the true facts out

The courts have just upheld the right of the people to present the HST petition to the government and that charade will play out while individuals in BC suffer.  The HST has already raised the inflation rate in BC by 2% yet on Global TV this morning on the Business news Sophie asked Campbell a soft question, about inflation and used the national number of 1.8%. It is what is not reported that shows the biases of the media.

The following is from this site The HST Blog, I encourage you to read it as it gives some interesting twists on how this tax works.

Gratuities as Added Consideration For the Supply

Posted on July 29, 2010 by Cyndee Todgham Cherniak

I was at an event last night hosted by Women's Post and a woman entrepreneur in the audience who was in the events planning business in Ontario asked why harmonized sales tax (HST) was charged being charged on gratuities (she had noticed this since the implementation of HST). She noticed that venues and caterers were quoting (1) the charge for the room and/or (2) the food/beverages and (3) a mandatory gratuity and that HST was being charged on all charges, including the gratuity.

The answer is that the Canada Revenue Agency (CRA) considers the mandatory gratuity to be extra consideration for the supply (say, of the rather than a contribution towards the salary (non-taxable) of the employees that will be working the event. The CRA had taken this position with the goods and services tax (GST). GST/HST is payable on the consideration for the supply and since the gratuity is considered by the CRA to be additional consideration, it goes into the calculation/formula. As a result, the CRA takes the position that GST/HST is payable on the added consideration that is the gratuity portion.

I have seen the same analysis used by CRA when they look at gratuities paid on restaurant meals, resort vacation packages, hair salon services, spa services, etc - whenever there is a mandatory gratuity OR when the gratuity is included in credit card payment (that is the recipient pays adds a gratuity to a credit card payment). For example, when I go to the hair salon, I pay by VISA. Before I indicate my PIN number when I use my chip card, I am asked whether I wish to add a tip or gratuity and I usually add 15%-20% of the tax-excluded price for the services rendered. The CRA when auditing such service providers/venues, adds the gratuity amounts to the consideration for the services and calculates the GST/HST owing.

Based on the cases I have seen, often the service provider does not charge the GST/HST on the gratuity portion and has to dip into their pockets to pay a substantial assessment.

The morale of the story is that when possible, recipients should give waitresses/waiters and service providers cash tips when they are adding an amount to the bill for the exceptions services performed by the individual to the recipient. If the gratuities are in the invoices or in the credit card payments 13/113 of the amount in Ontario (12/112 in BC, 15/115 in NS, 113/113 in Nfld/Lab. and NB) will not go to the waitress/service provider and will be remitted to the Receiver General of Canada. This is unfortunate because the individuals affected are making low hourly wages and rely on the gratuities as employment income (to make ends meet).

I have been involved in structuring the payments so that more money goes to the real people who work very hard for the additional employment income - it is possible if a business plans in advance of the CRA visit.

I was not aware of the above and when I have gone out, I have tipped using my credit card, I will not do that any more and I recommend that you do not either. When the time for recall comes in November remember the lies and sign that petition.

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