My Taxation Situation

Photo credit: toystogrowon.com

Photo credit: toystogrowon.com

Get ready for a long grumble if you talk to anyone in Canada about sales tax! Its visibility on our receipts makes it the brunt of our loudest tax complaining. Since 2008 when the federal Goods and Services Tax (GST) replaced an invisible manufacturer’s tax, the rates and the ways it’s been applied have wavered wildly.

One Canadian province and the three northern territories have only the 5% GST. The other 9 provinces set their own rate in addition to the federal 5. Mine, Nova Scotia, has the highest combined rate at 15%.

For comparison purposes, there is no US federal sales tax. Five states have no state sales tax and the highest US rate is 9-point-something in Tennessee. The UK has a value-added tax of 20% on most consumer goods, but by law, it is incorporated in the sticker price. It’s the same in Australia at 10%.

Let’s look at buying a non-essential consumer item like an unlocked, 32GB iPhone 5S…shall we? All prices include free shipping to a home in the area mentioned:

 

Halifax NS, Canada via apple.ca

$819 plus 15% tax ($122.85) = $941.85 CDN

Boston MA, USA via apple.com

$749 plus 6.25% state sales tax ($46.81) = $795.81 US

$896.48 CDN of which $52.73 would be tax

London UK via apple.com/uk

£629 includes £104.83 VAT = £629

$1175.92 CDN of which $195.98 would be tax

Sydney AUS via apple.com/au

$999 includes $90.82 VAT = $999 AUS

$1059.54 CDN of which $96.32 would be tax

 

A new-model iPhone is a luxury product no matter where you are, but these prices show how much money the government gets from your purchase. Is anyone else thinking of the Boston Tea Party? 🙂

Just for fun (you know me), I wanted to find out how much I pay in sales tax. Since the timing is right, I looked at the first quarter of 2014.

So I spent $7628 in the first 3 months of the year (oy!)

25% of that was on non-taxable items:

  • Basic groceries
  • Charitable donations
  • Household water service
  • Dental care
  • Health care
  • Bank charges (minimal)

Home heating and electricity have only the 5% GST, so they generated $53 for the government.

I paid 15% sales tax on all the rest (from highest to lowest cost):

  • Air fares and room deposit for upcoming Toronto trip
  • Furnace repair
  • Cable TV, Internet, land line and cell phone bills
  • Gas for car
  • Dining out (restaurants, cafes and take-out)
  • Clothes
  • Gifts
  • Snacks and café treats (candy, chips, ice cream)
  • Reimbursed job expenses
  • Personal care items (shampoo, toothpaste, etc.)
  • Taxable groceries (juice, cookies)
  • Skating helmet
  • Skating and skate sharpening
  • Windshield wipers for car
  • Bridge tolls
  • 2 DVDs
  • Cat food
  • Paper goods (tissues, toilet paper)
  • Hair cuts
  • Cookware (food storage containers)
  • Printer ink
  • Movie tickets
  • Cleaning supplies (dish detergent, garbage bags)
  • Postage
  • Stationery
  • Parking
  • Ice melt for the driveway

All of which generated $595 for my province. (And now you know everything I bought for the past 3 months!)

Well, the provinces are responsible for services like health, education, energy, economic development and local infrastructure. Provinces get their income from federal transfer payments, income tax, business tax, sales tax, fuel tax, tobacco and alcohol tax, lottery tickets, and vehicle permits.

The more you spend, the more sales tax you pay – it’s related to your level of consumption. Basic goods and services such as rent and groceries are not taxed, which benefits people on low incomes who spend more of their income on essentials. They’re also eligible for a GST rebate of about $260 a year, no receipts required. Businesses don’t have to collect and remit sales tax until their annual revenue is over $30,000. I never thought I would say this, but the sales tax system seems quite fair to me.

A little Che Cap I bought last week for $10.80 came out to $12.60 after tax and rounding ...

A little Che Cap I bought last week for $10.80 came out to $12.40 after tax and rounding …

Similar to this

Similar to this

But I still get sticker shock when Rom and I go out to dinner and there’s $6.75 tax on a $45 meal. Or the $20 sweater I bought rings up as $23. I would prefer the all-in price like they mandate in the UK and Australia.

What is your sales tax situation? Do you rail against it or grin and bear it?

35 comments

  1. EcoCatLady

    Hmmm… this isn’t something I’ve actually given a great deal of thought to. I had to go look up the sales tax rate here and it looks like Colorado charges somewhere between 3-4% (depending on which web page I believe) and Denver charges 3.6-4%. So I guess that means my total sales tax is 7.5-8%. But here’s the thing. I do the vast majority of my non-food shopping over the interwebs where there is no sales tax. Hmmm… never really thought about that before.

    But one thing I have developed a new appreciation for is our very low property taxes. I think that because we have a decent sales tax rate and a state income tax our property taxes are quite low. I pay around $750/year for a house that’s valued at a ballpark figure of about $150K. I think rates are much higher in other states.

    I dunno… mixed feelings all around. I mean, who likes to pay taxes? Nobody! But I do believe that government services are necessary and in general taxes serve the purpose of putting a very small dent in the income disparity that is so rampant in today’s society. I guess when push comes to shove I prefer a tax that discourages consumer spending over one that discourages home ownership or making a living.

    • I was surprised when I looked up state sales taxes and saw that in some areas, cities can impose their own rate. I read that in Chicago, it’s high enough that residents buy stuff out in the suburbs to get a reduced rate. Here in NS, someone will buy a car in NB to save 2% on taxes.

      I can’t imagine what it would be like for Internet retailers to collect and remit sales tax for every jurisdiction their buyers live in!

      I try not to complain about property taxes because they pay my salary.

  2. When we moved to New Jersey, I just about cried when I saw that there was no taxes on food. It really helped us out. With that said, I’ve made it a goal to not complain about taxes. They help many people, and as I live simply, I find myself not really missing the extra money. And I have to confess…I really love driving on pot hole-less roads.

    • Hi Michele,
      The last place you lived charged tax on groceries? Eek! My salary is paid from municipal taxes, which are raised through property taxes. So I try not to complain about taxes either. And I always appreciate the spring road repairs, too!

  3. yep 20% VAT here, some of our receipts break it down showing you exactly how much the VAT and sometimes, especially at wholesalers the price is excluding VAT and because we’re used to it being lumped together you have a heart attack at the till.

    Apparently we are not “taxed” on essential items yet ladies time of the month items are taxed so not deemed essential?…………..you started me off haven’t you 😉

    I don’t agree on VAT on fuel, but we are fobbed off with “it is part of the EU agreement” and then they wonder why with such tosh no one wants to be in the EU.

    Morning xxx

    • Ah, the debate about what is essential! My province recently removed the tax on “feminine protection” and diapers. Children’s clothes and shoes are not taxed – it goes by size, so I guess we’d better not have kids who are big for their age. Books are taxed at 5%, but magazines and newspapers have the full 15%. I could go on…

  4. Fiona

    Aha – now that explains why I see so many comments about GST on Canadian blogs. So is the non-GST price the one that is the advertised ‘ticket price’? That would sting, particularly if it’s different rates for different provinces.

    Here in Australia, almost everything is a GST-inclusive price. We pay 10% GST in all states on all consumer items but it’s more invisible. It’s itemised at the bottom of every receipt but you have to at least look at it to feel the sting of another tax!

    But like EcoCatLady, I would prefer a consumption tax over many other forms of taxation. As you say, I think it’s a fair system.

    I like looking at my grocery receipt: the GST is a good ready-reckoner for the ‘health’ of the trolley (here, staples and real food are GST-exempt while cady, junk food etc. have GST applied.) A low-GST trolley is usually all ‘good’ food.

    • Yes, all of our sticker prices are without the GST. So, a sweater with a sticker price of $20 actually costs $23 at the till. We are all mental math experts at calculating that 15%. It’s easy at restaurants because tipping 15% is the norm so you can just tip the stated GST amount! To make things complicated, stores often have no-GST sales. They actually have to charge tax, of course, so they reduce the price of the item by 15% and then add the tax back on, so you are paying just the sticker price – and that is considered a sale!

      I do the same thing with my grocery receipts! But it’s skewed a bit because cat food, toilet paper, toothpaste, etc are taxed. It does make me think twice about buying a bag of chips when the shelf price is $2.99 but I know with tax they are $3.44.

  5. friends from the usa is visiting me now in london and my friends said to keep the receipts as they can claim back the VAT(value added tax that is what it is named here instead of GST) it is 20%. it surprised me that tourists coming to uk and buying stuff here can reclaim the VAT . does canada also allow tourists to reclaim GST? i doubt it. i dont know any other country does.

  6. NY has sales tax on clothes and many people cross over to NJ to shop as a result (if they live close to the border). I don’t mind sales tax so long as it is put to good use. I suppose it seems less painful to pay when it is already incorporated into the price rather than added on at the till. Death and taxes…

  7. Juhli

    You do pay a high sales tax and sales taxes are regressive. However, I believe you (Canadians) get much better services and benefits from your government than we do in the US – health care for example. That being said, if I shop 2 blocks to the west of my house I am in a different county and a city both of which have higher tax rates than the county I live in. Our sales taxes are cumulative – state, county, city. And there are sales taxes, although a lower rate, on some groceries. We also pay property taxes on home and autos (each year), state and federal income tax. Some cities also levy income taxes. By the way, the states that don’t have sales tax simply collect it with higher taxes on other things.

    • Interesting. I had to look up regressive taxes. Our sales taxes are not cumulative, luckily. When I lived in MA there was some envy of NH which had no sales tax or state income tax. As you say, they simply shifted the burden to property owners and raised most their income through property taxes.

  8. Very taxing post LOL! – as you say our VAT or Value added tax is always included in the final price unless you buy wholesale in which case it is added on top . Some internet sites also add VAT on top so you have to be careful you compare like with like when price checking. it does look though as if UK is the dearest place to buy the phone – doesn’t surprise me at all.

    • I am careful when I compare prices because of “bigger issues.” For example, I can’t imagine living in the UK where groceries seem ridiculously cheap to me, but housing costs are through the roof! And where cars and car insurance are affordable, but petrol is not….etc etc!

  9. I have an alternative view to most people. I smile because I know I am contributing to hospitals, schools, roads, public transport, rubbish collection, parks, libraries, social services, great infrastructure. I smile because if it is GST (Goods and Service Tax) on luxury goods, I am in a better lace than most of the world and able to afford the luxury goods.

    I smile because GST means the high fliers with great accountants can’t evade paying tax so easily. And I smile because much of my grocery bill is unprocessed food and thus exempt in Australia from GST. So the GST doesn’t have to hit the poor so badly in that if they are struggling to buy food, they can avoid GST.

    I know people say “But what about the waste” and “But the politicians mismanage or give themselves lurks” in terms of tax in general. Meh. There really is not that much of it. And I am so happy I am in a country that has such a high standard of living and clean environments and great health and education.

    I don’t compare our GST with other countries because I don’t know about the total tax paid – PAYE, property tax, rates, tolls, licence fees etc.

    But it would annoy me to not have the price I have to pay at the register not on the docket of the item. Let me know at the point of looking at an item! Maybe I’d get used to it?

    • I agree with you, L. We have a good range of public services. In Canada most people don’t push too hard for dramatic tax cuts because they know programs, services, and people will suffer.

      I found it upsetting when I lived in the US and (in my state) each town funded its own schools, so there were massive differences in the quality of education from one town to the next.

      We are all ace at figuring out that 15%. It’s become second nature. I think we prefer 15% to when it was 13 or 14 because it’s easier to calculate, LOL! (Add 10% to the bill, then half of that again)

  10. I can even remember when we got GST! It was interesting to see what went up and down in price, removing the ‘hidden’ taxes it previously had. I also ‘judge’ my grocery bill on it’s healthiness based on GST items, and usually only have 1-2 items per week 😀

    It’s very contentious that tampons get GST applied, alas I’ve started a more eco friendly approach, so I haven’t seen them on my docket for a while.

    I really don’t enjoy travelling where taxes are added at the counter – it can be so hard to predict the final price! I do think it’s great for kids learning percentages and maths, but I’m sure many many adults are humiliated and confronted by getting it wrong though!

  11. Lisa

    I agree with you and Lucinda – we need taxes in order to pay for social services for all, hopefully fairly. I think the more you earn the more taxes you should pay. I am getting very tired of Canadians complaining about our taxes, and prices for certain utilities and gas. Just compare our gas prices to Europe, UK or Australia! Look at the Nordic countries for how a good, high tax system pays, in full, for many social services like College/University, daycare etc. I disagree, and believe that many Canadians are pushing for tax cuts and this is why political figures such as Harper and his ‘balance the budget at any cost’, Rob Ford etc. are around (maybe it is more of us whinging Ontarians). I was very angry when Harper decreased the GST from 7% to 5%. He has cut many services to make up for that short-fall, which individually many of us barely noticed the savings, but cost the government $14 billion dollars per year! I shudder to think of the cuts coming in order to reach their deficit elimination promise in time for the next election! ARGH…Harper ranting in my head! 😉

    • Thanks for adding to the conversation, Lisa. I’m on your side. I always marvel at the best of tax-funded programs like free university and childcare (elsewhere). I agree that a token cut in the tax rate to appease the voters will result in serious program cuts. A few months ago, my city put up a poll asking citizens how we’d ideally like to see local taxes spent on services. We were “given” the total budget and asked to allocate it. It really brought it home to me that if you increased public transit, you decreased police services, and so on.

  12. Shannon D.

    Of the posters, it looks like I am paying the smallest sales tax, 6.75%; 5.75% to the state and 1% to the county. However I am paying about twice as much in property taxes as EcoCatLady!

    • They must test the voters to see what they will tolerate in terms of where the taxes come from….ultimately they must have thought that homeowners can afford to fund the services, while sales tax would impact renters and lower-income people too much? I suppose until recent years, people who owned their own homes really were considered richer, but I am not sure we think that way any more.

  13. I agree that we should be paying some taxes, but our 20% VAT (in the UK) does make me baulk sometimes. If you’ve already paid 40% tax on your earned income and then pay another 20% when you purchase something, it can be a kicker.

    It can be a little unfair sometimes, say for childrens clothing – my son was in adult shoes from the age of 10 and there was no way of claiming that VAT back. I think there should be.

    I’m happy to pay sales tax when I travel because it’s supporting the local economy + it’s also good to have to do a little mental arithmetic 🙂

    • Yeah, we’re in the same boat, paying federal and provincial income tax, property tax and sales tax. I try to remember that I have a good lifestyle with the leftover money, and I have benefited from services like health care, education, roads, police and fire services, and of course, libraries 🙂 There are even improvements occasionally – basic dental care used to be covered for children up to age 10, changed to age 14, and may go higher.

  14. Around here, we have a hodge podge of what feels like 600 different taxes and it can be frustrating (it doesn’t help that I live by the borders of several states and shop there sometimes) – we have property tax on houses, rental tax on anything you rent (like DVD rental places and hotel rooms), gasoline tax, cigarette tax, etc. Shirts with a decal get taxed, plain shirts don’t. Alcohol made in certain states has a tax, alcohol from other places doesn’t. Big cities also tack on their own additional tax. My plan of action is to calculate an extra 10% (because it’s an easy number and the most I ever remember paying) and then be pleasantly surprised when the total is less. I cannot keep it all straight! Hopefully that money is going to something meaningful!

  15. Alice

    Ours increases all the time, there are reduced rates at the islands and near the borders but that doesn’t enhance the general situation. It is also varies.

    These measures are obviously ineffective-it’s a sad story. Wealthy become wealthier and poor are poorer. Even worse, the Greek Orthodox Church who possesses a colossal property doesn’t pay any taxes despite the fact the country is in dire straits.

    • Hmm, in Canada and the US, the Roman Catholic church is selling off their properties because church attendance is so low and they can’t pay for debts and upkeep.

      Did you know that in Canada, you “only” have to earn $190,000 to be in the 1%? LOL!

  16. Alice

    That makes sense!

  17. Anu

    I have been reading your blog every now and then, find it interesting and different! 🙂 I live in Finland and I admit we have free universities, almosts free daycare, health care etc. But I just hate VAT in our food. It’s expensive enough to pay heating costs in our climate as well as car costs (there is good public transport only in big cities) etc. Then you have to pay 14% VAT for your food. I don’t mind VAT in junk food or alcohol. http://www.helsinkitimes.fi/finland/finland-news/domestic/8866-finland-the-third-most-expensive-eu-country.html

    • Hi and welcome! That is a big trade-off, with all your free services but tax on groceries! Thanks for the link. Our heating costs were killer this year; it was one of the longest and coldest winters ever. Some crocuses popped up this week, though, and the ice is finally gone on the lakes (but not in the woods). Where I live we have bus service but no rapid transit. We are 1100-1200 km from the nearest large cities, Montreal and Boston.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: