CRA provides no clear answer whether businesses legally have to take part in the GST tax holiday

Five days into the government-mandated GST holiday, small-business owners across the country remain confused about how to apply the new rules — or whether they even have to.

 

Dan Kelly, head of the Canadian Federation of Independent Business, maintains that the GST holiday is optional, and businesses can choose to charge and remit GST on exempt items if they want to.

 

But when asked by the Star whether this is true, the Canada Revenue Agency would only say that “businesses who make reasonable efforts to comply with the legislation will not be the focus of our compliance actions.”

 

The CRA added that such compliance actions will focus on situations “where businesses wilfully and egregiously refuse to comply with the temporary measures.”

Amid the confusion, small-business owners such as Mike Heddle, owner of Bounty Hunter Toys in Hamilton, Ont., say they are frustrated by the lack of clear communication.

 

Heddle sells vintage and old toys. The GST holiday only covers children’s toys, not adult collectibles, but a lot of Heddle’s merchandise, such as Star Wars figurines dating back to 1995, could fall into either category.

 

When Heddle called the government helpline to clarify how to apply the rules, he couldn’t get through. “(It) was closed all weekend,” he said. “Absolutely pathetic.”

 

He decided it was simpler to remove the taxes on all of his merchandise rather than go through his stock item by item. “There was no way in hell I was going to alter over 80,000 items (in our point of sale system),” Heddle said.

 

The controversial tax holiday, which removes the federal and provincial tax from some items from Dec. 14 to Feb. 15, is aimed at helping Canadians “buy the things they need and save for the things they want,” according to the government’s website.

 

It covers groceries, restaurant meals, children’s clothing, toys, diapers, beer and wine, among other items, and will provide an estimated $1.6 billion in federal tax relief to consumers.

 

Industry watchers have criticized the move. It’s “gimmicky” and “political,” said the CFIB’s Kelly.

 

Chartered Professional Accountants Canada said it is “not good tax policy,” and while it may temporarily ease expenses, it is “inequitable, costly and economically counterproductive.”

 

The hassle has some industry watchers and businesses wondering whether the GST holiday is optional, but neither the CRA nor the Ministry of Finance would provide the Star with a clear answer on whether businesses can opt out.

 

On Saturday, federal Minister of Small Business Rechie Valdez told reporters “the Canada Revenue Agency will take a practical approach when it comes to compliance.”

 

“As long as small businesses do their best to comply with the legislation and demonstrate their ability to be able to do that, then the Canada Revenue Agency will not focus on them in terms of compliance.”

 

But when asked by the Star whether it was legally mandatory for businesses to drop the GST on the exempt items, Valdez did not respond before deadline.

 

The government is trying to make it seem like the GST holiday is a requirement, so that there will be “maximum implementation across the business landscape,” said the CFIB’s Kelly.

Kelly said he suspects that retailers who sell small amounts of items on the tax-exempt list will choose not to participate to avoid the “administrative headache.”

 

“Retailers will have to go through every item of their inventory and make judgment calls” on which items should be tax-free and which ones shouldn’t be, said Kelly.

 

Dropping the GST is indeed a labour-intensive process, said Kelvin Broad, manager of Coward Pharmacy, an independent pharmacy in Tillsonburg, Ont.

 

He said it took several hours to implement and his team has to monitor transactions at the cash register for missed items or items that have accidentally received the rebate.

 

The CFIB’s Kelly said that manufacturers and distributors of the exempt items should also be dropping the GST, but some aren’t. “Most don’t even seem to know that this applies to them too,” Kelly said.

 

In such cases — for instance corner stores that buy GST-exempt products from large suppliers — retailers would have to pay the GST on the goods when they purchase them, but won’t be able to recoup the GST from customers.

 

They’ll eventually get the GST back by filing for a GST rebate with the CRA, but the waiting period could “create some cash-flow pressures,” Kelly said.

 

 

 

This article was first reported by The Star