A people-pleasing addition to the coming Canadian economic overhaul: Fold the GST into retail prices #CanadaFinance

A lot of personal finance advice in the past five years has had to focus on helping people play defence with their money.

World events – the pandemic, the threat of a U.S.-Canada trade war – explain a lot of this. But there’s an underlying productivity issue that requires many households to conserve and sacrifice as cost increases overwhelm their income growth.

We need an economic overhaul that improves our productivity and diversifies our trade, goals that would require tax incentives, strategic government spending and other measures that would ultimately help increase incomes and wealth. A small, people-pleasing addition to these changes would be to include the GST/HST in retail prices.

A recent edition of the Carrick on Money newsletter invited readers to say whether they support the idea of all-in pricing with sales taxes. About 300 people responded by e-mail, with more than 90 per cent endorsing the idea.

Interest in all-in pricing has been driven by unhappiness with the deceptive practices some companies use in showing how much their products and services cost. The term junk fees describes the extra costs you don’t find out about until you get to the end of a transaction.

Examples of junk fees:

• paying a processing fee when buying concert tickets or a movie ticket online;
• airline baggage fees, and charges to pick a seat that isn’t at the back;
• resort fees at hotels;
• shipping charges for online orders.

Sales tax isn’t a junk fee – it’s a way for governments to tax consumption and generate revenue because you pay more as you spend more. Also, lower-income individuals receive quarterly rebates designed to offset the GST or HST they pay.

But the way the GST/HST is set up today validates the idea that the price shown for a good or service is not actually the price. There are always extra costs to be paid.

Showing the GST separately made sense on its launch in 1991 because of the need to be transparent with a new tax measure that increased costs for consumers. Now, that transparency seems misleading. A $99.99 price tag in Ontario is $113 at checkout.

Readers who were against all-in pricing said the current system puts the GST front and centre and thus helps to make the government accountable for the way it taxes and spends. They also wonder if folding the tax into prices would make it easier for governments to increase sales tax.

The majority view is that all-in pricing would be a relief, and many noted how common it is in European countries for prices to include tax. A few good points were raised about all-in pricing:

• It would need to be applied in all provinces and territories;
• customers should be shown on their receipts how much federal and provincial tax was included in their purchase;
• big-ticket items such as vehicles may need special handling.

Tipping was on the mind of a lot of the people who commented on all-in pricing, particularly those who believe in tipping on the pre-tax amount. In restaurants these days, it’s already the norm for payment terminals to offer preset tipping percentages based on costs plus tax.

While having the GST piled on at checkout can be annoying, at least we know it’s coming. Junk fees are worse because they’re so slimy. Tacked on at checkout, they send a message that a company is afraid or unwilling to be upfront about what its product or service costs.

It’s a shock to write this, but the financial industry is a leader in clear pricing. If you want to know what an exchange-traded fund or mutual fund costs to own, just check out the management expense ratio shown in online information and regulatory documents. Digital brokers for DIY investors now commonly show their prices, a refreshingly jargon-free way of addressing commissions and fees.

Pressure from regulators has produced a uniform level of strong cost disclosure for many facets of investing. What a contrast to the deceptive pricing we so often see these days when buying goods and services. How to strike a small blow for more economic clarity and efficiency: Fold the GST/HST into retail prices.

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