Exam (elaborations)
FMGT 4410 - _GST_HST_ (1)
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FMGT 4410 - _GST_HST_ (1)
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FMGT 4410 - "GST/HST"When was GST introduced? - ANS-January 1, 1991
The rate for GST has been 5% since: - ANS-2008
What was the hope of the developers of GST? - ANS-That provinces would amalgamate their
PST with GST so that taxpayers would have a uniform national approach to the taxation of
goods and service transactions.
Do organizations (such as charities and unincorporated businesses) have to file GST/HST
returns even thoguh they are not required to file income tax returns? - ANS-yes
Charities may still be required to charge GST on taxable supplies, even if they don't have to pay
taxes on income.
What are these items exempt from?
* Food for human consumption (basic groceries and prepared food such as restaurant meals)
* Books, newspapers and magazines
* Children-sized clothing
* Bicycles
* Prescription medications and household medical aids such as cough syrup and pain
medications - ANS-BC PST
Is a transaction tax (like GST) charged on the sale of a good or service or on income? - ANS-on
the sale of a good or service
On which parties is the tax assessed and collected by? - ANS-* The tax is assessed on the
recipient of taxable supplies
* The responsibility for collection of the tax is with the provider (i.e. the seller) of the taxable
supplies (the GST registrant)
What are the 3 advantages of a transaction tax? - ANS-* simplicity
* incentive to work
* consistency
What is the disadvantage of a transaction tax? - ANS-* regressive nature
This is because those who earn lower income are required to pay a higher percentage of their
income in transaction taxes. There is a GST tax credit available to low-income individuals in
order to make up for this regressive tax.
, Which 5 provinces have HST in effect? - ANS-* New Brunswick
* Nova Scotia
* Newfoundland
* Ontario
* PEI
These provinces eliminated their separate PST.
Did BC ever introduce HST? - ANS-British Columbia introduced HST in 2010, but after a bitterly
fought referendum in 2011, returned to the GST/PST system in 2013. BC HST was previously
12% (combination of 5% GST plus 7% PST) with further plans to reduce the amount in the
subsequent years.
What are the advantages of an HST system? - ANS-* Administrative costs are greatly reduced
(Eliminates the dual administrative system required to collect both GST and PST.)
* Businesses receive input tax credits on the full amount of HST.
* If BC adopts HST, its businesses can compete with businesses in provinces that have already
adopted HST, because those businesses have lower production costs due to HST.
* To make up for additional costs to consumers, certain taxpayers would receive rebates
What are the disadvantages of an HST System? - ANS-* Consumers were paying more tax in
certain areas with the introduction of HST than they would have paid before.
* Services such as haircuts and massages had HST charged on them when no PST was
charged on them before.
* HST reduces the cost of production for businesses, but if these business export their goods,
then the consumers benefitting from this will be foreign.
What is the difference between Single Stage Transaction Tax vs. Multi-Stage Transaction Tax? -
ANS-* A single stage transaction tax at the consumer level means that the final consumer would
pay the transaction tax.
* A multi-stage transaction tax is where the transaction tax is applied at various (or all) levels in
the distribution chain.
What are VATs - ANS-Value added taxes are multi-stage transaction taxes that can be assessed
in 2 basic ways.
* Accounts-Based Method
* Invoice-Credit Method.
What is the Accounts-based Method of VAT? - ANS-Purchase is only taxed on the increase in
cost (i.e. taxed on the mark-up) from one business process to the next.
What is the Invoice-Credit Method of VAT? - ANS-Each purchaser is taxed on the full amount
but receives a credit back for GST paid that was already paid by the seller.
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