Ottawa changes GST rules, setting up finance battle

[Francis2004]

Ottawa changes GST rules, setting up finance battle

Ottawa has quietly moved to tax some financial services, setting up a fight the sector says will cost more than $1-billion a year.

The government has changed the rules on a goods and services tax exemption in a way that the industry says applies GST for the first time to a number of financial services offered by, for example, mortgage brokers and insurance advisers. The industry says the costs will be passed on to consumers. Banks, insurers, mortgage and insurance brokers, and investment companies are urging the Finance Department to retract its amendments and hold broad consultations before going back to the drawing board.

At issue is the definition of “financial service” in the tax laws. Such services are generally exempt from GST but Ottawa has changed the definition so that many activities that “facilitate” or “prepare” financial services are now subject to tax. The industry says Ottawa hasn't clarified how broadly the rules will apply but it appears that many services offered by brokers and advisers are newly taxable, including, for example, trailer commissions paid to mutual fund dealers, commissions paid to a car dealer to arrange credit for a car buyer, and some work telemarketers do for insurers.

Mike Firth, a tax partner with PricewaterhouseCoopers, has written a paper for the CCH GST Monitor, a tax publication, in which he calls the situation a “ghastly mess.”

In an interview he said that Ottawa either made a “deliberate decision to extract billions more in revenue from the financial sector, presented as a ‘clarification,’ or the intention was much more limited but the combination of legislation drafted by the Finance Department and execution by the [Canada Revenue Agency] has mutated into a very radical policy shift. Neither possibility is very attractive.”

Ottawa issued a press release in December saying it was clarifying the rules, and the CRA followed up with a notice in February. Legal and accounting experts with financial services clients say that notice went far beyond what the sector was expecting and made a number of services that have been exempt from the GST since 1991 taxable.

CTV News | Ottawa changes GST rules, setting up finance battle

So all along we thought it was just the HST in Ontario and BC.. But was it really just a matter of time before all these services would have been affected by the GST anyway ? Note the article states at the bottom that these are retroactive to Dec 14 ?

 

[VanIsle]

I guess I have been sleeping. I've never heard of any of this before. The one thing I did notice in what you say is the tax on Insurance. When you have a mortgage, you are required by law (bank law I suppose or maybe CMHC) to insure your house and property. It's a requirement, not really a "service". I don't think they can tax something that is mandatory.
Government seems to be making changes regarding limits on what credit card companies can charge in interest rates and other fees. Maybe not so much of these changes will be passed onto the public - at least until they find a way around it - banks always do. Banks are still making money hand over fist and I guess the gov't wants their share. They obviously don't want to bankrupt our banks as we seem to have bragging rights world wide at the moment as to the operation of our banks so any charges gov't is adding to the banks must be in gov't's best interests.
That said, as for the gov't making credit companies hold their fees down, I believe I saw a note on a Sears bill stating they were raising their rates. Their rates are near 30% now so I pity the person with an outstanding balance.

 

[jjaycee98]

That said, as for the gov't making credit companies hold their fees down, I believe I saw a note on a Sears bill stating they were raising their rates. Their rates are near 30% now so I pity the person with an outstanding balance.

Anyone who has debt at 29% really needs to give their head a shake.