HST expected to improve interprovincial trade
Some businesses with more local trade concerned about new tax
Many P.E.I. businesses are keen for the arrival of the harmonized sales tax on April 1, expecting it will help them compete for contracts on the mainland.
Under the HST, business can claim back more tax than they can under the current system of combined provincial sales tax and federal GST. That has put some businesses at a disadvantage when competing with businesses on the mainland, where the HST is already in effect.
"We've lost work because of it," said Doug Coles, VP at the Charlottetown engineering firm Coles Associates.
"We've lost productivity because of it, not being able to keep our people as busy. What this latest announcement from the government means to us is a very positive impact on our bottom line."
It's a disadvantage Coles Associates has had to deal with for 16 years, ever since the HST was introduced in Nova Scotia and New Brunswick. Coles said, with the input tax credits his company will soon be able to claim, he can bid more competitively, secure more work, and eventually, hire more people.
That has been government's biggest selling point with the new business-friendly tax: it will create jobs, increase wages and boost the economy.
But businesses that don't regularly compete with those on the mainland see it differently.
Dan Pattison, a self-employed cabinetmaker, is concerned the new tax will make what he does more expensive. He's expecting customers to feel some sticker shock.
"I think there's going to be a period of time where just the increased cost involved might make people think twice," said Pattison.
Pattison's business partner and wife, Laura, is also concerned about the impact of the new tax on Islanders' disposable income. The tax is expected to bring in another $30 million in revenue for the government, and economists say the shift in tax burden from consumers to businesses will be another $30 million to $50 million.
Over the course of the next few years prices should fall as businesses pass tax savings to customers, but in the short term Islanders will have less money to spend, and Laura Pattison is concerned that will have a direct impact on sales at her family business.
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