A temporary “tax holiday” could prove to be a “hot mess” for small businesses preparing to implement the new measure this week, according to the Canadian Federation of Independent Business.
The Liberal legislation is set to come into effect on Saturday, slashing the goods and services tax (GST) or harmonized sales tax (HST) on dozens of items, including some groceries.
The two-month tax break will save taxpayers about $1.5 billion and reduce that amount from federal revenue, according to the parliamentary budget officer (PBO) said in a numerical note published Monday.
The PBO’s estimate is consistent with that of the federal government, which estimates the cost of the tax relief at approximately $1.6 billion.
The four Atlantic provinces and Ontario have their own provincial and federal sales taxes combined into the HST. The PBO said the “tax holiday” could cost the federal government an additional $1.26 billion if these provinces do not waive compensation required under their agreements with Ottawa.
To date, Ontario And Newfoundland and Labrador said they would be equivalent to the federal government’s tax break.
The “GST holiday” bill passed in the House of Commons last month. The bill has now reached final reading in the Senate and if passed there will receive Royal Assent.
Small businesses in crisis
The “GST holiday” will apply to certain grocery productsalcoholic beverages and children’s clothing and shoes, among other items.
Many retailers are scrambling to comply with the new rules, CFIB says, arguing they haven’t had enough time to prepare for the tax break.
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“Business owners had just two weeks to prepare, right in the middle of their busiest season,” said Dan Kelly, CFIB President. said in a statement Monday.
“For some small retailers, this required reviewing and making judgments on thousands of items based on limited guidelines from the Canada Revenue Agency. This is going to be a real disaster. »
Kelly warned that “it will be almost impossible for most retailers to implement this right.”
“This temporary tax change created entirely new tax categories that had never existed before, including differential sales tax rates on toys marketed to adults or children, beverages based on their alcohol percentage or collectible dolls versus play dolls,” he said.
“Consumers will bring their own interpretation, expecting part-time clerks and store owners to suddenly become tax experts on rules that even the CRA struggles to understand. »
Certain toys, including games, dolls and puzzles, for children under 14 are eligible for tax relief.
Toronto store Face to Face Games is finishing preparing for the changes, determining what will and will not qualify under the guidelines.
“There was a little discussion about the spirit of the rule. Ultimately, it came down to which games were aimed at those 14 and up, and which were aimed at people below that age group,” said Cameron Hart, head of Face to Face Games, in a interview with Global News.
Hart believes the tax break is a positive step for customers who he hopes will end up saving on their holiday purchases, but determining the guidelines has been difficult, he said.
His team had to bring in an accountant to ensure a smooth transition.
“We didn’t have a customer service line we could call for the government, so I think like a lot of businesses we’re probably making it up as we go along and hoping for the best.”
To help take some of the pressure off small businesses, CFIB says it has released a free counter sign that businesses can use to explain their challenges and urge customers to be patient.
“If a business owner makes a mistake and doesn’t charge tax when they’re supposed to, or charges tax when they weren’t supposed to, many business owners panic to the idea of the CRA showing up in March or April and sending a giant bill after audit – charging back taxes, penalties and interest,” CFIB said.
This is why CFIB is urging the federal government to show leniency.
The group is demanding that the CRA waive taxes owed, penalties and interest for any errors made in good faith and that Ottawa grant affected small businesses a credit of at least $1,000 in their GST/HST accounts for cover the costs of implementing the tax relief. .
– with files from Megan King of Global News
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