Cascading HST on Ontario Ecotaxes: This Is Unfair
The Ontario Ministry of Revenue concluded that sales tax is payable on top of ecotaxes-included prices. This means Ontarians pay tax on a tax when they buy tires, electronics and certain hazardous goods. Tax on a tax is called "cascading tax".
Ontarians have been paying cascading taxes for over 2 years. In August 2009, the Ministry of Revenue issued Information Notice 76 "Ontario Tire Stewardship Fees" in which it indicated Ontario retail sales tax was payable on ecotax included pricing on tires:
"If retailers choose to recover this cost by passing it on to their customers in the form of higher prices or as a separate charge on the customer's invoice, it forms part of the fair value of the taxable product and/or service provided and is subject to RST at a rate of 8 per cent. Retailers are required to charge, collect and remit RST on the total selling price of any taxable goods and/or services sold."
In a different Information Notice issued in May 2009 (shortly after the announcement of harmonization), the Ministry of Revenue made it clear that ORST would be payable on the ecotaxes on electronics. In Information Notice 74 "Ontario Electronic Stewardship Fees", the Ontario government made the same statement quoted above.
These notices have been updated to acknowledge HST, but have not amended the above quoted paragraph to speak specifically to HST. That being said, it is well know that the position of the Ontario government and the Canada Revenue Agency that HST is payable on top of ecotaxes. Ellen Roseman wrote a great blog post over a year ago entitled "Eco fee or eco tax?", which highlighted this cascading tax issue.
Paying the ecotaxes on new items is inconsistent with the legislation and regulations are they are currently drafted. Paying tax on tax is unfair. It is further problematic because there is an incentive to raise the ecotaxes (to collect more tax revenue) so that you raise the price of the goods in order to collect more HST. There is an incentive for a lack of transparency and hiding the tax.
Cyndee Todgham Cherniak is counsel to and in affiliation with the International Trade Law and the Tax Law (Commodity Tax
