Manitoba farmers will likely pay less tax if the GST and PST are harmonized, says Ian Wishart, president of the Keystone Agricultural Producers (KAP).
Ron Westfall, a chartered accountant and partner with BDO Dunwoody in Morden, agrees. But both say they need to see the details to be certain.
“It (HST) can work for us,” Wishart said in an interview last week. “We have some major items we are paying (provincial sales) tax on, like building materials for agriculture, that has always been a sore point with us.”
Recently the Manitoba government said it’s considering harmonizing its seven per cent sales tax with the federal government’s five per cent goods and services tax (GST). Ontario and British Columbia will have a harmonized tax as of July 1, 2010. Manitoba, Saskatchewan and
“The way it appears right now it would not be a bad change.”
– RON WESTFALL
“It (HST) can work for us.”
– IAN WISHART
Prince Edward Island will be the only provinces without an HST. (Alberta doesn’t have a provincial sales tax and Quebec has a harmonized tax that it administers).
Some of the things farmers buy for their operations, such as machinery parts, are now exempt from the Manitoba government’s seven per cent PST. In contrast, farmers pay the five per cent federal GST on most goods and services. Presumably, under HST, farmers would pay 12 per cent tax on parts. However, farmers would apply to get the HST they pay related to business expenses refunded, as they do now for the GST.
If the PST and GST are harmonized, Wishart and Westfall said farmers would pay more up front in tax, but get most of it back, resulting in a net tax savings.
“The way it appears right now it would not be a bad change,” Westfall said. “It will be more of a timing thing. Now a farmer doesn’t pay PST on parts but they will pay GST. If there is an HST they will have to pay the full amount up front and get a larger amount back later on.”
Harmonizing the taxes would result in less paperwork for all businesses, including farmers, Wishart said.
“And that’s never a bad thing,” he added.
Although theoretically the HST should benefit farmers, Wishart cautioned KAP wants to see the details before endorsing the change. KAP has requested a meeting with Finance Minister Greg Selinger.
“We’re trying to be out in front of this one,” Wishart said.
“Generally speaking it’s thought the ag sector is a winner out there on this and we’re going to pay less tax, but it depends on what the province does.”
It’s possible the Manitoba government might decide not to refund the HST on some goods and services purchased by farmers, Wishart said.
“The province is pretty revenue hungry these days,” he said.
On the other hand, he added, there can’t be too much variation, or it defeats the purpose of harmonizing the two taxes.
Many businesses and economists support the HST, saying it will reduce costs and paperwork and will be more transparent and efficient. However, support isn’t universal. While most businesses will get the HST they pay refunded, some businesses fear the additional tax consumers will potentially pay on everything from funerals and airfares to taxi fares and real estate fees will hurt sales.
The HST could be costly to the Manitoba government too. Selinger told the Winnipeg Free Press that under an HST, Manitoba tax revenues would plunge by more than $200 million a year, according to a study by the C. D. Howe Institute. But with tax credits to assist low-income consumers and rebates to ensure the HST is revenue neutral for municipalities, the province could be out $400 million.