1054 replies to this topic

[Bob Fugger]

Savings which you in turn passed on to your customers, correct?

Well, therein lies the rub for the restaurant industry - the savings were enough to help keep costs from rising as fast as they are, but not enough to affect pricing. This is because most of our product is composed of zero-rated or exempt goods.

That is, because we didn't have PST/GST built into our inputs, there were no built-in tax costs for us to remove and thus no HST for us to pay in the first place upon which to collect input tax credits. So the restaurant industry is a bit of a bad example for cost savings to consumers, which is arguably why HST should not have applied to restaurant meals.

The only thing where we might have been able to do something is for alcoholic drinks: under the old regime, SST+GST = 15%, wheras under the HST regime, it would have = 12%. Since industry practice is to include tax in the cost you see printed in the beverage menu (varies based on establishment), there would have been an opportunity to reduce drink prices by 3%. However, the sneaky basterds at the LDB (likely on Liberal government orders) on the same day that HST came into effect, eliminated the 3% licencee discount on liqour sales. So the 3% savings we may have been able to pass along because of the drop in tax was coindicentally taken back by the government with the same hand that it enacted the HST.

[sebberry]

Will that 3% discount be reinstated when we revert back to the GST/PST? Or will alcohol prices be 3% higher?

[Bob Fugger]

Will that 3% discount be reinstated when we revert back to the GST/PST? Or will alcohol prices be 3% higher?

That is a very good question. I know that despite the repeated curbings our industry has recieved over this past year - including massive spikes in the cost of tomatoes and halibut and minimum wage increases - we have held back on raising our prices, where we've heard that a lot of our competitors raised theirs.

Although I am not responsible for setting price levels, I can guess that liquor prices will likely remain where they are, but prices of other menu items might go up.

[VicHockeyFan]

The only thing where we might have been able to do something is for alcoholic drinks: under the old regime, SST+GST = 15%, wheras under the HST regime, it would have = 12%. Since industry practice is to include tax in the cost you see printed in the beverage menu (varies based on establishment), there would have been an opportunity to reduce drink prices by 3%. However, the sneaky basterds at the LDB (likely on Liberal government orders) on the same day that HST came into effect, eliminated the 3% licencee discount on liqour sales. So the 3% savings we may have been able to pass along because of the drop in tax was coindicentally taken back by the government with the same hand that it enacted the HST.

Right, but that only kept the wholesale price at the same level, didn't it? And restaurants pay pretty much the same as a consumer at a liquor store for product. But then we mark it up. So I think there was some additional savings for liquor a restaurant or bar could have passed on.

[Bob Fugger]

Right, but that only kept the wholesale price at the same level, didn't it? And restaurants pay pretty much the same as a consumer at a liquor store for product. But then we mark it up. So I think there was some additional savings for liquor a restaurant or bar could have passed on.

The way I understood it was that licensees paid 3% less than what you our I would pay on liquor at the LDB retail store, pre-HST. When the HST came in, the 3% drop in total tax revenue was counteracted with the elimination of our 3% discount. So any discount we might have considered passing along was clawed right back.

As for mark up, I suppose that a proprietor can tweak that irrespective of taxation levels. But as we both know, that's a delicate formula - you may make x% on draft beer sales but you're subsidizing a loss leader like a steak where you lose y%.

EDIT: Wait, I think I just realized that I'm talking about apples and oranges. The restaurant pays 3% more on its raw booze, but the patron pays 3% less per drink - even though we never saw that 3%, anyway. So we lost again?

[LJ]

Many, many more, including the tulip farmer and the masses of angry, torch bearing citizens marching behind him saw "efficiency" in a different light. Restaurant owners, barbers, and others with small businesses saw there prices go up for their customers- not so efficient for them- and consumers saw a continuation of the modern trend of hitting the middle class with costs, while those at the more fortunate end of the financial pyramid reap more gain.

Did he get a new pair of glasses? He seems to have missed the masses of angry torch bearing citizens that want the property transfer tax he imposed, scuttled.

[sebberry]

Did he get a new pair of glasses? He seems to have missed the masses of angry torch bearing citizens that want the property transfer tax he imposed, scuttled.

How quickly people forget..

[J Douglas]

I am a restaurant owner and I will cop to the fact that we had the same kneejerk reaction that everyone had. Once the initial shock wore off, sales were back to where they once were (and beyond) and our overhead costs dropped. Not much, but enough so they weren't going up, either. More of the tax we paid was coming back to us and our bookkeeper's hours went down.

While I agree that altruism wasn't at the forefront of big business's fervour for the HST, I tell you that it was a boon to small business. Yes, there was a tax shift: but prices also went down. Case in point, I was looking to purchase storm windows for my house in 2010, just before the HST kicked in. I waited until August of 2010 and asked for the same firm to requote me. Lo and behold, the cost went down $300 (on a $2,800 job). Since I would have been charged PST & GST on it under the old regime, this was an acual savings of $300. Was it all attributable to the HST? I don't know, but I'll bet at least some of it was.

Just because big business liked it, it didn't automatically make it bad for the small producer or the consumer. It is unfortunate that The Zalm thought that the best way to punish the Liberal government was to cut our nose off to spite our face.

Yes, things do tend to normalize themselves, for a while anyway. People tend to just suck it up, unless they become directly threatened with the loss of some core item. If Christie Clark went door to door in Victoria, and kicked each of us in the nether parts when we opened the door, yes there would be a big scandal, and investigation, she would lose her job, but- life would carry one, people would forget, and the Liberals would keep their position. That doesn't make it right.

You say Bob, that you cannot pass along savings to the public, the equation is just not so simple as that. And that has been my observation too, that savings are not necessarily passed on. The glib pronouncements of the Liberals were insufficient to describe the actual workings of their plan. My barber doesn't pass on savings- what is he going to pass on? The local rec center- same story. I can't, of course, speak about your window example, but I can tell you that a thermal window salesman told me that after the HST, sales dropped so much that he is essentially without work.

When people really want something, they tend to go out and get it, gritting their teeth perhaps if the price is too high. But at some point, the balance tips; the price is simply too much, under any circumstances. And then people don't buy. Some restaurants, with the HST, may now be a centimeter or two below their tipping point. The window man I talked to may have already tipped.

Even the Liberal's own investigation stated that the HST is a tax shift, away from business and on to consumers. There is a political philosophy beneath it which reflects a belief in an unfettered market. It is a belief that says that pretty much any new enticement, concession, tax holiday, or other largesse awarded to business will be used to the utmost advantage to society, and will surely trickle down the less astute in the population. Well folks, how many times do we have to see the failure of this line of thought before taking a wiser approach?

Given extra funds through a tax break, individuals in business may do a number of things with it. Bob's experience was that it was simply redirected to other areas. My barber simply passed along the expense. The performance of the financial industry in our recent near-meltdown indicates that funds are not necessarily directed to the most beneficial place, or even ones that can be ethically defended. GM used some of it's bailout money to open a new facility in China. Many large corporations are using their money to buy back shares, rather than invest in new plant, or hire workers. The reason for this is often found in the relation of dividends to CEO bonuses, the latter a subject we hardly need to include here.

People will stick with the herd for so long, until the comfort level drops far enough, and then they may diverge. This was the case with the HST.

[J Douglas]

How quickly people forget..

Well, we give murderers parole after 25 years. Maybe we should cut Shovel Willie some slack. He may have taken a few sociology or history courses during his retirement.

[Bob Fugger]

Given extra funds through a tax break, individuals in business may do a number of things with it. Bob's experience was that it was simply redirected to other areas. My barber simply passed along the expense.

Thanks for the reasoned discussion, J Douglas. I think we can both agree that for many services or businesses whose inputs are zero-rated or exempt goods but whose outputs are taxed (such as barbers and restaurants), HST appears to make little sense, as there are little savings for the business to actually pass on.

[mc9]

When is the HST supposed to be phased out? Do we have a date yet?

[sebberry]

Why did I think it won't be until 2013? It was supposed to be 12-18 months, but I suspect 18 months is more like it.

[Bingo]

Why did I think it won't be until 2013? It was supposed to be 12-18 months, but I suspect 18 months is more like it.

It will become a provincial election issue in 2013.

[rjag]

Yup and if the NDP win they will reap what they sowed when theres no more HST!

God help us all

[Nparker]

The impact on new housing of the HST has been to lower the costs, the return of the PST will increase the costs...

Please explain as I have not seen any significant reduction in the costs of new housing (that can't be explained by a softened real estate market), especially considering that contractors have to charge 7% more for labour than under the PST/GST program. I simply don't believe any cost savings of the HST have been passed on to the consumer at the purchasing level.

[Bernard]

Please explain as I have not seen any significant reduction in the costs of new housing (that can't be explained by a softened real estate market), especially considering that contractors have to charge 7% more for labour than under the PST/GST program. I simply don't believe any cost savings of the HST have been passed on to the consumer at the purchasing level.

The cost of materials is lower and BC has on top of that offered a rebate of $26,500 on houses costing less than $525,000

With the return of the PST, costs for contractors will rise.

[Nparker]

With the return of the PST, costs for contractors will rise.

More than the 7% reduction in the cost of labour?

[Sparky]

Rather than relocate a conversation that Bob Fugger and I were having in the provincial election 2013 thread, I decided to leave those discussions there and re start the conversation here.

Bob's last statement

Maybe you want to move these posts into a new thread so we can debate further, as we are way OT, here?

With respect to your post, you are correct in that items that you purchase for resale are purchased with a PST number and therefore the tax is only collected on the end user purchase. HOWEVER, in my example, under the old PST, the window manufacturer is deemed to be the end user of the glass and wood, even though they are only inputs for the final product. He fashions the inputs into a window and charges PST on that.

In addition, under the old PST, a contractor can choose to bill you for supply and install (PST + GST) OR all-included (GST). Most people opted for the latter - no PST, right? WRONG! Again, the contractor becomes the end user and so they are paying PST on wood, screws, glass, paint, etc. Wanna take a guess as to who ends up eating those costs? Sparky, you work with contractors, so we both know that it's not the contractor, lol!

Do you see, now, how both business and consumer win under a Value Added Tax (HST) as opposed to a ****ty, regressive transaction tax (PST)?

One of my first jobs out of university was writing tax rulings for the old Ministry of Provincial Revenue and I forgot how much fun the ins-and-outs of the old PST tax code were!

I think that consumers and businessmen like and dislike the HST for different reasons. Businesses that purchase a lot of equipment are able to use the tax credit to lower prices and be more competitive.

End users however, than can not take advantage of the tax credits, but use a lot of labour intensive services, residential stratas for example, have found their operating costs to increase.

Its too bad that the introduction of this tax was shrouded in a cloak of political bungling, maybe if it were around a little longer, I may have changed my mind about it.

I wonder what's coming down the pipe next?

[Nparker]

...Businesses that purchase a lot of equipment are able to use the tax credit to lower prices and be more competitive...

In theory. In practice as a consumer I can't think of a single item that came down in price with the introduction of HST.

[Bernard]

The rough break even point for a business with the HST came at 50% labour and 50% materials. Higher than that in materials and you saved, lower than that odds are you paid more. Hardest hit have been lawyers, accountants and consultants - aka people providing services to the richest people