The GST will drop by one percentage point on Saturday, a Canada Day gift for consumers that will go on giving as long as they go on buying.
But the decline to 6 per cent from 7 per cent also has its drawbacks. For example, some stores are struggling to deal with the new tax rate, some prices simply won't change, and alcohol taxes will increase to make up the GST revenue the government will lose.
"Budget 2006 proposes to increase alcohol excise duties to offset the impact of the GST rate reduction," the May 2 budget document said.
That could work out to an extra 30 cents on a 750-millilitre bottle of booze, John Williamson of the Canadian Taxpayers Federation told the Canadian Press.
For Debra Hurd, the GST cut represents a big gain. She saved $7,000 on her new $700,000 home in Calgary because the deal doesn't close until July 20.
"I think it's totally awesome," she said.
Some companies have already adjusted prices. At the Mississauga Hyundai car dealership just west of Toronto, Hyundai felt it had to pay the one point GST cut itself during June because sales were dropping off. Customers were waiting until July to save $200 to $300 on the average car.
Hyundai "had to step up," said Scott Pollock at the dealership, or else buyers would just wait until after July 1.
Other stores are working with advisors such as
Xi-Nam Dam of Ottawa's Global Mart consultants
to re-program their cash registers, trying to figure out how to take one percentage point off low-priced items — or deciding not to.
At Ottawa's Corner Kitchen restaurant, Debbie Peterson said most items will drop, but the $1 cup of coffee will probably not change. Likewise, prices at hot-dog carts, vending machines, movie tickets, and on taxi meters and parking meters are all expected to remain unchanged.
Gas prices, which include the GST, are also unlikely to fall.
It's just too expensive to change some prices, or not worth the effort of making the change so consumers get a two-cent break on a $2 item.
Robert Sexty, a Memorial University of Newfoundland business professor, said consumers like lower taxes, "but it's probably not going to make a lot of difference, particularly on small purchases."
For instance, the $2 swim at city-run pools in St. John's will not change because the city has a policy of rounding to the nearest nickel.
The Canada Revenue Agency said it's up to consumers to police the GST cut, as there are no fines for not dropping the tax, spokeswoman Jacinthe LeBlanc told CBC News.
Consumers can fill out a form, with their receipts to prove they didn't get the cut, or they can call the agency.
Other tax changes
July 1 will also see other changes to the tax rules, including:
- A new tax credit on employment income of up to $500 for the last half of 2006, rising to $1,000 in January for the full year of 2007.
- The rate on the lowest tax bracket will go to 15.5 per cent on July 1, after the Liberals cut it from 16 per cent to 15 per cent in their fiscal update in November 2005.
- The introduction of the annual $1,200 payment for each child under six.
- A tax credit on transit passes.
