30% of retail sales on PEI are effectively PST free when they are made online

While CUPE and Treasurer Wes Sheridan protest that PEI will not join the rest of Canada with the HST, how long can that continue?

The simple fact is that PEI is losing tens of millions in sales tax revenue by digging it’s heels into the sand.

Sure PEI collects provincial sales tax on most items sold at retail on PEI. However, the rise of INTERNET shopping is leaving the Provincial coffers dry on items people buy on line.

Canadian retail sales are worth about $500 billion annually. In the past five years, the amount of retail shopping on the Internet has grown from a meager $35 billion to over $150 billion at recent estimates.

That means up to 30% of Island retail purchases are effectively exempt from PST.

The law says you must declare and remit PST on goods purchased off Island. For folks who make the odd shopping trip to Moncton, that is a nuisance and probably one forgotten.

However, Wes Sheridan has the real numbers. How much is the province getting in voluntary payments for Internet purchases? Probably a very small fraction of the real amount Islanders spend on-line.

If the Province was part of the HST program, Federal GST and provincial PST are blended. Since no one can avoid the GST in Canada – even imports pay the toll – PEI’s tax base will be preserved as more retail moves from the store front to the desktop.

Exempting clothing probably brings some shoppers to the mainland to PEI but they aren’t filling the Province’s bank account. A government must and will protect its sources of revenue. That is the reason the fines are higher for smuggling cigarettes than marijuana. People who smuggle cigarettes are stealing money from the federal and provincial governments which is a bigger crime than getting high.

The stumbling block for a government is selling the middle class’s lack of interest in higher taxes. However, the reduced rate of 13% essentially deals with the overall tax cost to the middle class.

For the poor, the government knows it can easily deal with this on a low cost basis by introducing refundable tax credits on PEI income tax. Low income earners will get their higher taxes back. This works for so many social credits now, it’s a wonder we still bother with Provincial social assistance after the emergency period.

Why does CUPE protest the HST? CUPE backs P.E.I.’s anti-HST stand (CBC)

Milo Murray, the CUPE provincial division president, said he couldn’t be happier with the government’s position.

“If they stick to their word on that, I congratulate them,” he said. “Who will suffer is the people with lower income brackets, due to the fact that the tax will go on not only furnace oil, but electricity.”

No doubt CUPE is concerned about the number of its members dislocated through adoption of the HST. We count about 25 people working in collections and audit for PEI’s sales tax. That number might change however, the federal government actually grew its staff when the GST started. Audit staff in Charlottetown swelled from less than 10 before GST to 35+ afterwards.

The GST has become the single largest source of revenue for the federal government. How much longer will PEI’s smallest province be able to afford the luxury of an antiquated PST. when Internet sales hit 50% of retail?

HST is better for business since they can deduct GST paid from GST collected. Better for business is also better for government although they have been dangerously reducing corporate income tax rates.