GST/HST Archives

CRA Tax Tip: GST/HST tax filing: quick and easy

The following tax tip is available from the CRA web site:

Did you know... That you can file your goods and services tax/harmonized sales tax (GST/HST) return electronically from your home or office?

Eligible registrants can use the access code from their personalized return to file returns with an amount owing, a nil balance, or a refund of $10,000 or less using GST/HST NETFILE, GST/HST TELEFILE, or My Business Account.

When you file electronically, do not mail a copy of your return to the Canada Revenue Agency. If you need to pay a balance owing, use your financial institution's Internet or telephone banking service or Form RC158, GST/HST Netfile/Telefile Remittance Voucher, to make your payment.

If you are filing on paper, be sure to include your Business Number and reporting period dates to ensure quick processing of your return. When filing on paper, do not use Form RC158 to make your payment.
For more information on filing your GST/HST return electronically, go to www.cra.gc.ca/gsthst-filing. To access My Business Account, go to www.cra.gc.ca/mybusinessaccount.

CRA Tax Tip: More services to simplify your business taxes

The following tax tip is provided by the Canada Revenue Agency:

Did you know...

That you now have additional options to help manage your business taxes through our My Business Account service?

Business owners can now use this secure online service to:

check the status of goods and services tax/harmonized sales tax (GST/HST)* returns and see when Notices of Assessment were issued; and
access a variety of business tax information and services, including account balances and activities.

Starting in November 2008, you will be able to transfer payments and credits within your GST/HST,* corporation income tax, or other levies account. This service will allow you to transfer amounts not yet applied to an assessed period and view the results immediately, including updated interest amounts and account balances. If the amount you wish to transfer has already been applied to an assessed period, you can request a transfer through our Make online requests service in My Business Account.

Business owners can authorize their employees and representatives to view or change their tax information online. Once authorized, the employees and representatives would access the services through Represent a client at www.cra.gc.ca/representatives.

For more information on this tax tip and others, visit the CRA web site at:
http://www.cra-arc.gc.ca/nwsrm/txtps/2008/tt081022-eng.html

Tax Savings in ’07 (Especially for Families) and Dips Down Again in ’08

Taxpayers Hope Next Budget will Cut Rates

Provincial Winners: Newfoundland, Quebec & B.C. The Loser: New Brunswick

Ottawa: The Canadian Taxpayers Federation (CTF) today released projected income, payroll and sales tax changes kicking in on January 1st, 2008. Also calculated are retroactive personal income tax changes – which apply to the 2007 tax year – announced by the finance minister in the fall economic statement that saw the bottom income tax rate fall to 15% from 15.5% and the basic personal exemption – the amount a person can earn before they pay federal income tax – increase by $671, from $8,929 to $9,600.

“Due to retroactive tax changes announced in the fall, coupled with changes that take effect in the New Year, almost all taxpaying Canadians will pay the Taxman less in 2007 and 2008. The exception is in New Brunswick,” stated CTF federal director John Williamson. “Thanks to the broad-based tax relief announced in the economic statement, the average taxpayer’s retroactive tax savings this year will be $223. This will climb to $272 after factoring in changes that take place next year. Families will save even more thanks to a new child credit worth $300 per child and a higher spousal exemption, which were also enacted for the ’07 tax year. Plus let’s not forget the January 1st GST reduction. While harder to quantify, it will save the typical Canadian household between $150 and $200 annually.”

“But taxpayers shouldn’t clap too loudly as Ottawa’s ‘new’ 15% rate simply restores the lowest income tax rate to what it was in 2005 before the Conservative finance minister raised it in his first budget. Jim Flaherty should be working to cut personal income tax rates, not patting himself on the back for returning them to the level they were when he came into office.”

To see the income and payroll tax changes in 2007 and 2008 for various income levels, households and for all 10 provinces go to Chart #1 at: http://www.taxpayer.com/pdf/2008_tax_burden.pdf

Tax Relief in 2008 – Only Modest Gains due to Indexation

Additional tax reductions next year are due mostly to the indexation of the personal income tax brackets. Other specific tax changes include:

Payroll Taxes: Minuscule EI Reduction and Bigger CPP Bite

Effective January 1, 2008, the employee rate per $100 of insurable earnings will be adjusted to $1.73, a reduction of 7 cents from its current level of $1.80. The corresponding employer rate will be adjusted to $2.42, a reduction of 10 cents from its current level of $2.52. The maximum insurable earnings will rise from $40,000 to $41,100 which is the ceiling up to which EI premiums are collected. Employees will therefore pay a maximum of $711.03 and employers $994.62 for a total EI payment of $1,705.65.

“With a $3.3-billion surplus in the EI fund last year, Ottawa should cut rates and match EI revenues to EI payments, allowing for only a modest reserve, and harmonize the employer rate with those of employees,” said Williamson. “Cutting this tax will help job creation and give manufacturers a break at a time when they are struggling with dollar parity.”

Under the Canada Pension Plan, the maximum pensionable earnings for 2008 will be $44,900 (up from $43,700 in 2007) and the basic exemption amount will remain unchanged at $3,500. The employee and employer contribution rates will each remain unchanged at 4.95%. Because the contribution rate is staying the same while the threshold (ceiling) increases, most taxpayers will pay slightly more in CPP payments in 2008. Employees and employers will each pay a maximum of $2,049.30 for a total CPP payment of $4,098.60.

See Chart #2 for EI and CPP tax payments and increases: http://www.taxpayer.com/pdf/2008_payroll_Taxes.pdf

“The net payroll tax bill on workers will increase because the EI tax reductions will be gobbled up by a higher EI threshold and rising CPP payments. Average worker will pay $50.43 more in payroll taxes and employers $46.02 more,” said Williamson. “Ottawa is wrong to increase the EI tax ceiling when the program continues to amass surpluses. It is another example of giving a tax break with one hand, by lowering the EI tax rate, and taking it away with the other, by raising the threshold.”

A 5% GST is a $5-billion Annual Tax Savings

The GST will be reduced by a further one percentage point on January 1, fulfilling the Conservatives’ marquee pledge to reduce the tax by two points. This additional cut will save the average household between $150 and $200 annually. “While some have criticized cutting the GST, it is a broad-based tax cut that puts $5-billion back in the pockets of over-taxed Canadians,” observed Williamson. “And given that this is the second point cut, the total household savings will be between $300 and $400 each year. This is good news particularly since $10-billion in the pockets of Canadian consumers is preferable to Ottawa hoarding the cash.”

Provincial Income Tax Changes

Three provinces have additional relief coming to its taxpayers in the New Year. Newfoundland and Labrador reduced all provincial income tax rates and has eliminated its provincial surtax altogether. The typical taxpayer will save $420 in provincial and federal taxes next year (plus GST savings). Quebec rates remain the same although the thresholds have increased substantially which will result in the largest tax savings in the country as of January 1st. The average Quebecer will pay $500 less next year (plus any GST savings). The tax savings will increase in each province as incomes rise above $45,000. Meanwhile, British Columbia has cut all of its provincial income tax rates except the top one which also results in additional savings. As such, average taxpayers in Lotus Land save $223 (again, plus GST savings).

New Brunswick’s provincial income tax increase in 2007 means all individuals earning more than $52,700 paid more income tax this year. Individuals with incomes below $52,700 paid less thanks to federal tax reductions, but their savings were smaller than other Canadian taxpayers because of the province’s tax hike.

See Chart #3 for provincial tax rates/comparisons: http://www.taxpayer.com/pdf/2008-provincial_taxes.pdf

More Relief Needed to Eliminate Structural Over-taxation

While the tax relief announced in Ottawa’s annual economic statement was a good start, Canadians remain over-taxed. “More must be done to reduce personal income taxes. It is not sufficient for parliamentarians to only discuss cutting taxes for low-income Canadians. According to the OECD and even Canada’s finance department, our personal income tax burden remains the highest of the G-7 nations. This standing has not changed in almost a decade and means the French and Italians pay less personal income tax than Canadians,” noted Williamson.

“Broad-based tax relief is necessary to ensure all income levels benefit from lower taxes. Ottawa must focus on further reducing personal income taxes in the 2008 budget and we can suggest several options. At a minimum the Conservative government could chop the two middle rates of 26% and 22% a point each and raise the income threshold at which the top rate of 29% begins to apply to $200,000,” Williamson said. “This proposal can hardly be called radical as it was the tax relief model the Liberals campaigned on in the last election.

“Liberal leader Stephane Dion would have a hard time voting against his party’s own tax proposal if Minister Flaherty were to enact it in the next budget. While the Liberal caucus might squirm, it would be a good tax cut for overburdened Canadians. The goal is to lower income taxes and very few taxpayers will complain if it means implementing the Liberal’s old plan under a Conservative banner.”

John Williamson
Federal Director
Canadian Taxpayers Federation

Canadian Chamber joins Save-the-GST Club

One of the surprising outcomes of the Canadian dollar reaching parity with the U.S. greenback is a renewed attack on reducing the GST a second point. The Canadian Chamber of Commerce last month called on the Conservative government to break its election promise to cut the GST to 5% and instead lower business taxes. The normally somber chamber of commerce has joined the “Save the GST Club.”

Perrin Beatty, the group’s new president, is worried our high flying loonie makes it tougher for Canadian manufacturers to compete internationally. It is a legitimate concern – an increase to business costs vis-à-vis our competitors will squeeze sales and impact manufacturers. His solution: “I would like to see the government put a priority on cutting costs of doing business across the Canada-U.S. border.” He favours accelerating Ottawa’s tax-reduction plan, but “not the GST.”

Mr. Beatty is wrong to link corporate tax relief to scuttling the next GST reduction.

First, both can be done when Ottawa is swimming is cash. The federal surplus was $13.2-billion two years ago, $14.2-billion last year, and has already topped $7.8-billion only four months into the current fiscal year. The federal government has ample room to reduce taxes. It should do so.

Second, Ottawa has a spending problem not a revenue problem. Why does the chamber think it better policy to limit or swap tax relief rather than reign in spending? Even if Ottawa was not accumulating surplus atop of surplus, the objective should be on reducing federal expenditures, which have already increased by a staggering $24.4-billion under Conservative rule.

Does Mr. Beatty think it wise to grow the size of the federal government by 14%? Or is the chamber simply unwilling to make the tougher public case that expenditure growth and the high tax rates that fuel spending is the real roadblock to cutting the cost of doing business, not a measly one point GST cut? It would be a mistake to limit the scope of tax relief for even higher spending levels.

Third, public opinion matters and Mr. Beatty’s idea to cancel another GST cut reinforces the view the business lobby is willing to trade away personal tax gains for its own tax cut. Tax relief should not be restricted to corporate Canada. Business and individuals are overtaxed and should pay less tax. If Mr. Beatty remains concerned Ottawa does not have the fiscal capacity to lower business taxes further, he ought to instead focus on scrapping business subsidies, something Canadians know as corporate welfare.

Since the Conservatives were elected 20 months ago, every argument has been floated to discredit lowering the GST. It is not a “smart tax cut.” It does not help the poor. Now, dollar parity means Ottawa cannot cut this tax. Canadians aren’t having any of it. They understand the surplus means they are overtaxed. As such, many taxpayers are in agreement with Milton Friedman’s maxim that any tax cut, any time, is a good thing.

Mr. Beatty’s chamber of commerce illustrates the problem of lobbyist and elite opinion-makers casually tossing aside important campaign promises. Voters expect key commitments to carry some weight. Most believe it is essential for politicians to keep their word.

Politicians that do not can face significant trouble – if not outright hostility – from voters in the subsequent election. Just look at Premier Dalton McGuinty. Four years ago he told Ontario voters, “I won’t cut taxes, but I won’t raise them either.” Today, they remember this broken promise and Mr. McGuinty is struggling to win a second mandate.

The Harper government has already upset some investors by taxing income trusts. The about-face will certainly cause his party to lose votes in the next federal election. Imagine the firestorm of protest if the Conservatives broke a promise that benefited all Canadian consumers.

Mr. Beatty’s policy proposal is neither necessary nor viable. Politicians should not break their words, and the Canadian Chamber of Commerce should not ask them to.

John Williamson
Federal Director
Canadian Taxpayers Federation

A New GST/HST Processing System

The Canada Revenue Agency (CRA) has issued a news release announcing that the CRA has enhanced its GST/HST processing and is placing a new system into operation.

"These improvements build on the shared commitment of National Revenue Minister Carol Skelton and the CRA to reduce the compliance and paperwork burden for Canada’s small businesses as outlined in the recent report from the Action Task Force on Small Business Issues www.cra.gc.ca/atfreport."

"The modernization of the processing of GST and HST will enable CRA to expand its services to businesses, and improve compliance."

"Starting now, GST/HST registrants can use the CRA’s My Business Account www.cra.gc.ca/mybusinessaccount and Online Requests for Business www.cra.gc.ca/requests-business to electronically ask the CRA to perform certain actions on their account."

For more information, see:
http://www.cra-arc.gc.ca/newsroom/releases/2007/may/nr070516-e.html

Reminder of upcoming amendments to fairness provisions in

As a reminder to Canadians, the Canada Revenue Agency (CRA) has issued the following news release:

Ottawa, Ontario, February 28, 2007... The Canada Revenue Agency (CRA) reminds goods and services tax/harmonized sales tax (GST/HST) registrants that they have until March 31, 2007, to review their records and send in any requests for penalty and interest relief under the fairness provisions for a reporting period that ended on or before December 31, 1996.

Legislative changes to the fairness provisions in the Excise Tax Act (both for GST/HST and non-GST/HST purposes) were introduced in 2006. Starting April 1, 2007, the Minister's discretion to waive or cancel penalties and interest will be limited to requests for reporting periods that ended within any of the 10 calendar years preceding the calendar year in which the request is made.

For more information on this news release, please visit:
http://www.cra-arc.gc.ca/newsroom/releases/2007/feb/nr070228-e.html

GST rate cut takes effect July 1, 2006

In the federal budget announced May 2, 2006, the federal government followed through with its promise to cut the GST rate from seven per cent to six and the HST rate from 15 per cent to 14 starting July 1st, 2006.

Changing the rate may be a simple process for small businesses (using simple systems or more manually-based processes in which they can override the default tax amount), larger businesses may not be so lucky. Many face more serious challenges in reprogramming their systems.

For more information on applying the rate reductions for July 1st, 2006, businesses may want to consult the Canada Revenue Agency's questions and answers at:

http://www.cra-arc.gc.ca/agency/budget/2006/gstrateqa-e.html

Tax Relief “Anti-Growth” – I Think Not

On Wednesday, Liberal finance critic John McCallum penned a spirited opinion-editorial in the National Post against reducing the GST. The former bank economist called on the Conservative government to renege on its GST pledge and break faith with voters, just like the Liberals did after promising to scrap the tax altogether to win power in 1993. His argument cries out for debunking.

Mr. McCallum writes that cutting the GST is "anti-growth." This is absurd, as is his professed belief that "Canada's economists" all agree with him.

Very few economists share the opinion that reducing a consumption tax is anti-growth. Broadly-based tax reductions – of any kind – leave more money in the pockets of consumers. As such, a cut to the GST would act as an economic stimulant, not a depressant.

Instead of cutting the GST, Mr. McCallum prefers the previous Liberal government's tax proposal to cut the lowest personal income tax rate from 16 per cent to 15 per cent. This tax rate applies only to the first $36,400 of income. The other rates of 22 per cent, 26 per cent and 29 per cent remain unchanged. In addition, there is a small increase to the basic personal exemption, which is the amount an individual earns before paying federal income tax .

But these changes translate into savings of no more than $360 for Canadian taxpayers in 2006. Moreover, because this relief is aimed at low-income earners, it will not significantly boost Canada's productivity by generating more investment.

It would be an altogether different story if Mr. McCallum had championed a cut to marginal income tax rates – the high taxes on middle and top income earners. Those are the pro-growth tax cuts necessary to improve productivity and economic performance.

Mr. McCallum is hoping to convince Canadians his party's tax plan would induce the same economic benefits that result from lowering top marginal taxes. It would not. The Liberal income tax cuts are no more – or less – productivity-enhancing than the Conservative GST cut.

In truth, neither of the tax proposals coming from the two major parties would do much to improve Canada's global competitive position. Yet cutting the GST is still a welcome measure, for it will leave approximately $4.5-billion a year in taxpayer's pockets and help drive growth. That doesn’t mean more cannot be done.

Finance Minister Jim Flaherty understands this well. So should federal Liberals, who implemented a five-year tax reduction plan that began in 2000 and reduced income taxes on low-, middle- and upper-income Canadians. The result was stronger growth and lower unemployment.

When Mr. Flaherty delivers the Conservative government's first budget, he must include the promised GST reduction. He should also bring down marginal income taxes. Both measures will ultimately improve the living standards of Canadian families.

John Williamson
Federal Director
Canadian Taxpayers Federation

Conservatives propose cutting GST to 5%

As they prepare for the upcoming federal election, Stephen Harper and the federal Conservative party have proposed cutting the Goods and Services Tax by 2% down to 5% from the current 7% tax.

Long controversial since it was implemented under the Mulroney government, the GST was once promised to be scrapped by the Liberals. As irony would have it, now Paul Martin and the Liberals are in a position of having to defend the GST and its 7% rate in responding to the Conservatives election tactic.

The text of the Conservative's promise can be found on the Conservative Party web site: "Stephen Harper to cut the GST to five per cent".

The Liberal Party response can also be found online: "Harper Tax Proposal Wrong for Canadians"

At the time of writing, there were no responses to the proposed GST cut on either the Bloc Quebecois or the NDP web sites.

CRA July GST credit payments

On July 5, 2005 the Canada Revenue Agency issued the July goods and services tax/harmonized sales tax (GST/HST) credit payments.

Those individuals who chose to have their GST/HST credit payments deposited directly into their accounts should have received their payments on that day. Individuals who receive their GST/HST credit cheques by mail can expect to receive them within the 10 business days.

For more information, see:
http://www.cra-arc.gc.ca/newsroom/releases/2005/july/nr050705-e.html

Municipal GST/HST Rebate Information

Information is now available on the Canada Revenue Agency web site regarding Goods and Services/Harmonized Sales Tax (GST/HST) rebate amounts for municipalities.

"As part of the New Deal for Cities and Communities, the Government of Canada is committed to help all communities secure stable, predictable, long-term funding," stated Minister Godfrey. "Municipalities across this country are benefiting from the GST/HST rebate, which they are using for their most pressing needs. The rebate, delivered in Budget 2004, is providing $7 billion over 10 years. Budget 2005 builds on this commitment to municipalities by providing $5 billion in gas tax funds over the next five years, and committing to renewing and extending programs such as the Canadian Strategic Infrastructure Fund, the Municipal Rural Infrastructure fund, and the Border Infrastructure Fund as they expire."

More information is available on the CRA web site at:
http://www.cra-arc.gc.ca/newsroom/releases/2005/may/0526gst-e.html

$500k fine and 2 years for GST fraud

Today the Canada Revenue Agency issued a news release citing a case of GST tax fraud in British Columbia.

The news release stated that Rolf Van Nuys and Valley Heavy Equipment Inc. pleaded guilty to 14 counts of GST fraud in Abbotsford Provincial Court. The Abbotsford businessman was sentenced to two years and six months in jail. He and the company were fined $501,830.

More information is available on the CRA web site at:
http://www.cra-arc.gc.ca/newsroom/releases/2005/feb/0202vancouver-e.html

The CRA also reported a near $350,000 fine to a London travel agency director for tax evasion. According to the CRA web site, Walter T. Whale, director of 556032 Ontario Limited (operating as Travelsource Network) was fined $254,060 for failing to remit $127,030 in GST, and fined $7,760 for evading the payment of federal corporate income taxes for the taxation years of 1995 to 1999.

More information is available on the CRA web site at:
http://www.cra-arc.gc.ca/newsroom/prosecutions/on/0202london-e.html