HST is a new tax in Ontario and in British Columbia being implemented on July 1. Some items already have PST and GST but the number of items subject to tax will increase. Will this affect your business?
HST will have two impacts on your business. One – it will make things cheaper for businesses as you no longer have to pay PST on goods consumed by the business. This is an 8% savings because the business will now get a HST credit for the full taxes being paid instead of just the GST. In the month of June, many companies may realize that if they waited one month, they would be able to save PST or 8% on their purchases if they have to pay the PST. As a result, I am predicting that sales for many companies will drop in the month of June if their customers are businesses. For those in the retail sector, business will boom as many people may try to buy things before having to pay the extra tax.
I do not believe that the public has fully realized that they will have less disposable income after July 1 then before. Interest rates are rising in Canada, combined with the implementation of HST, I believe that consumers will have less money to spend. This will impact the lower wage earners more than the higher income families. As a result, sales may decrease initially until people get used to their new cash flow. Everyone knows that they will have less cash, but no one really knows how much less they will have therefore they do not know how that will impact their spending. But if your business is dependent on lower income earners then be prepared for a dip in sales in the summer and fall of this year.
If you are an investor, you will not know the impact that HST and rising interest rates will have on the business for sale therefore you may want to wait 1 to 3 months to see if the business for sale is impacted.