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 Post subject: Because on PEI We Want You to Stay in Business!
PostPosted: June 7th, 2005, 12:36 pm 
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Now this is a smart move...

Quote:
Business asked for PST before opening

Last updated Jun 7 2005 08:44 AM ADT
CBC News
VICTORIA – The owners of a restaurant and pub in Victoria by the Sea have been asked to pay the province $24,000 in anticipated sales tax before serving a single meal or pouring a pint.

It has Steven Hunter and Mike Storey feeling unfairly targeted by the provincial government.

However, the government contends it is trying to protect taxpayers.

Hunter and Storey have used their own money to set up shop on the Victoria wharf. And they have been able to avoid taking out a loan to help start their business.

Hunter can't understand why government thinks he and his partner would run off with sales tax money.

The provincial government figures, based on projected sales, the PST for this summer will be $24,000. And it wants the money before any business takes place.

"They had us over a barrel, there's no doubt about it. We have to make the payment, but it's not an easy thing to do, and for a smaller operation that's working on a very tight budget, it would almost be impossible."

Provincial Tax Commissioner Jim Ramsey said taxpayers lose $2 million a year when businesses go under.

He said new businesses that are considered high risk are asked to pay up front, and the policy is paying off.

GOVERNMENT OF P.E.I.: Tax and Land Information Website

"In several cases we had a substantial amount of money on deposit. And when those businesses failed, we were able to collect on the security and save the taxpayers a loss."

Ramsay won't say why his department put the restaurant in the high risk category. But said only two per cent of new businesses are asked for the money in advance.

Despite losing $2 million a year the department said it is not practical or necessary to make every new business pay the PST in advance.


Philip W

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Age shall not weary them, nor the years condemn.
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 Post subject:
PostPosted: June 7th, 2005, 12:40 pm 
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makes sence


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 Post subject:
PostPosted: June 7th, 2005, 1:04 pm 
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rocketpei44 wrote:
makes sence


It might make cents but it doesn't make sense.


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 Post subject:
PostPosted: June 7th, 2005, 1:11 pm 
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its a risk business, if it goes under with out the government being paid us taxpayers are paying for the mess, now that the government got their money, taxpayers are off the hook


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 Post subject:
PostPosted: June 7th, 2005, 1:13 pm 
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rocketpei44 wrote:
its a risk business, if it goes under with out the government being paid us taxpayers are paying for the mess, now that the government got their money, taxpayers are off the hook


Funny how they don't collect taxes up front for the businesses they have given start-up subsidies or grants, eh ... you know, the ones where we would stand to lose not only the tax money but the subsidy money.


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 Post subject:
PostPosted: June 7th, 2005, 1:32 pm 
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rocketpei44 wrote:
its a risk business, if it goes under with out the government being paid us taxpayers are paying for the mess, now that the government got their money, taxpayers are off the hook


So who decides which business is a risk? Surel;y not the same gov reponsible for Polar Foods, closing Little Christos or the blueberry fiasco up east?

Philip W

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Age shall not weary them, nor the years condemn.
At the going down of the sun and in the morning
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 Post subject:
PostPosted: June 7th, 2005, 1:36 pm 
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philipw wrote:
Surel;y not the same gov reponsible for Polar Foods, closing Little Christos or the blueberry fiasco up east?


Or the looming Sandwich Factory fiasco (you heard it here first).


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 Post subject:
PostPosted: June 7th, 2005, 10:10 pm 
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I admit that I'm somewhat ignorant when it comes to matters of finance, especially as they relate to taxes...

...but this seems ridiculous to me.

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 Post subject:
PostPosted: June 7th, 2005, 10:23 pm 
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The provincial government figures, based on projected sales, the PST for this summer will be $24,000.

It's the "projected" that gets me. It's guessing. It's predicting the future. Soon we'll have to pay taxes on products of the future...after all we may die before we are able to pay.


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 Post subject:
PostPosted: June 7th, 2005, 10:45 pm 
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Rob MacD said:
...but this seems ridiculous to me.

This is rediculous. Leave it to the Govt to bite off its nose to spite its face.

Here is a business which is mostly self financed...no government money involved...guess they voted wrong. Looking at the forcasted sales of $240,000 they must be planning to serve a lot of meals...the government is taxing a restaraunt on sales of $2857 a day based on 12 weeks. One would have to realize that for such an operation, this would require some days to gross over $5000 a day based on known shoulder seasons in that 12 weeks...damn...must be a fair size.

Seems to me that the risk of losing a bit of tax might be a lot less then the liklihood many people will not start small business based on the need to stuff the governments pockets in advance. Its one thing to try to borrow to start a business, but to borrow to pay advance tax?

It's thinking like this that kills the incentive to open business and get people off welfare roles.

Another great idea from the Provincial dunces. Keep it up and no business will start without requiring a golden vaccine from the provincial coffers.


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 Post subject:
PostPosted: June 8th, 2005, 5:34 am 
Gotta side with the government this time. Its way to easy for a restaurant to hide sales!
Maybe The governemt should have been a little more up front on its collection of taxes policy but thats all!
Its better to collect the taxes on presumed sales and refund the difference at the end of the season than the government not collect any taxes when an outfit goes bust!


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 Post subject:
PostPosted: June 8th, 2005, 7:26 am 
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Lanc said:
Quote:
Gotta side with the government this time. Its way to easy for a restaurant to hide sales!

Maybe The governemt should have been a little more up front on its collection of taxes policy but thats all!
Its better to collect the taxes on presumed sales and refund the difference at the end of the season than the government not collect any taxes when an outfit goes bust!


I understand where you are coming from Lanc but I disagree.

Regarding the ability to hide sales, this doesn't come into this at all. The Restaraunt will still file their monthly tax report in exactly the same way, and this will not change declared sales in any way.

The losses from such businesses which disappear account for a tiny portion of the $2 million stated. These losses actually come from businesses like Myrons which get away for months at a time without submitting their taxes.

This is nothing but a new way to get money in the provincial coffers early and has nothing to do with the declared reasons. Soon you will hear from Construction firms and other small business hit up the same way.

PEI seems to be on the course of instituting a similar system to Australia which forces all businesses to pay income and sales taxes based on forcasts.

Start of the slippery slope. Sad thing is that it will cost jobs...big time. No one could claim without choking that this government is capable to see the consequences of their actions, eh?


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 Post subject:
PostPosted: June 8th, 2005, 8:46 am 
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its better that the government gets its money now, then if it does go bust us taxpayers are off the hook

is it that hard to understand

i believe this isn't the first business at this venue either thus making it high risk


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 Post subject:
PostPosted: June 8th, 2005, 10:28 am 
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Hey...if you are so anxious for the government to get it's money in advance since we all know they will be responsible with it, why not estimate your consumption based on your projected earning power and charge you sales tax and income tax in advance. The logic is the same.


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 Post subject:
PostPosted: June 8th, 2005, 10:44 am 
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Maybe there's a reason why the gov't considers them to be high risk? Perhaps the new owners have a history of failed businesses. Maybe their business plan sucked. We don't know why this new business falls into the 2% of new startups who are asked for the money in advance.


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 Post subject:
PostPosted: June 8th, 2005, 11:20 am 
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Tracy wrote:
Maybe there's a reason why the gov't considers them to be high risk? Perhaps the new owners have a history of failed businesses. Maybe their business plan sucked. We don't know why this new business falls into the 2% of new startups who are asked for the money in advance.


Why would the gov read the business plan???? They never have before - and really could care less about the business plan.

I think that this has been going on for some time and a business has finally decided to speak up. Most probably just viewed it as the price of getting their tax number and paid the bill.

The math was done above. This is a small restaurant in a small community. $2800+ a day????? Please!

Philip W

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Age shall not weary them, nor the years condemn.
At the going down of the sun and in the morning
We will remember them".


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 Post subject:
PostPosted: June 8th, 2005, 11:53 am 
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Sorry, Philip, I didn't know you worked for Taxation and Property Records.

Again, we don't know why this particular business has been asked to pay up front. Hell, maybe they used their own startup money because they couldn't *get* a loan.


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 Post subject:
PostPosted: June 8th, 2005, 12:08 pm 
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Tracy wrote:
Sorry, Philip, I didn't know you worked for Taxation and Property Records.

Again, we don't know why this particular business has been asked to pay up front. Hell, maybe they used their own startup money because they couldn't *get* a loan.


I don't work for the gov at all.

I have been in business a number of times - and do know that the gov never looks at independant business plans. They don't care.

Couldn't get a loan???? Maybe they simply had the money and wanted to do something with it.

Twice on PEI I have started my own business out of my own pocket. There were two reasons for this - one I did not want the gov dictating to me how my money shoulds be used and they would have had they got involved.

And second - starting a business in hock to a bank is not the wisest choice to me.

No - we do not have all the details on these two owners - and that is part of the problem. I still think it is wrong for the gov to pre-tax someone based on projections. If the gov had said "ok, lets put this money in trust" maybe my thoughts would be a little different.

Now the CFIB is coming into the discussion.

http://pei.cbc.ca/regional/servlet/View ... b_20050608

Quote from the article....

Quote:
"I'm not a gambling person, but I'd wager a bank would not put forward $25,000 to appease the government's needs of feeling that there will be money there to cover the PST. I mean it's not fair. These guys are paying for someone else's mistake, and that's not fair."


And that is the crux of it. It is not fair to pre-tax people. If the feds decided to do this to you based on what you might make next year, I bet you would be furious and screaming.

Philip W

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Age shall not weary them, nor the years condemn.
At the going down of the sun and in the morning
We will remember them".


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 Post subject:
PostPosted: June 8th, 2005, 12:18 pm 
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philipw wrote:

And that is the crux of it. It is not fair to pre-tax people. If the feds decided to do this to you based on what you might make next year, I bet you would be furious and screaming.


If I didn't pay my taxes in previous years, then I could certainly see why they would. Not that I'd be overjoyed, by any means.

I'm not saying that what the government is doing is right....and I'm not saying it's wrong. We just simply don't have enough information about this situation for me to get it up for this. A lot of people are making the assumption that these owners have a clean slate, and that the government's just picking on them.


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 Post subject:
PostPosted: June 8th, 2005, 12:30 pm 
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Guys have to side with the Gov't on this, This policy has been in place for over a year. They conducted a study of their own files to see where the highest risks were. It was determined that the food & beverage, hairdressers and used car sectors accounted for the largest failures and underground market.

The estimate comes from your business plan that you have to submit to get a tax license. Therefore the estimates are determined from what you submit. The gov't does not guess this, in unusual cases where they do they go by other similar businesses and come up with an estimate from there. Not very hard when they have all the info.

They do not have to pay this amount in cash up front. They can go to their insurance company a purchase a security bond in that amount.

Look at the restuarant industry, it is a very unstable sector, look back over the years at how many have come and gone, scary isn't it. They are trying to protect their interests by forcing high risk sectors to beleive in themselves and put a gaurantee where there plan is. If these business run successfully and do not show disregard for the tax system (pmts in full and on time) then I beleive after 5 years they can get their bonds back. Therefore in the meantime I beleive that the costs of this bonds may reach around $1000, not bad to protect our taxes paid.

Where the problem lies is that over the years the Province hasn't been replacing their tax dept staff. Tax remittences are due on the 20th of each month, if you fail to remit it may not be picked up until you are 2 months past due, then by the time the tax man comes calling you will be 3 months behind. So if you look at the case of this restaurant in Victoria, if they submitted their 1st two on time (which will be their weakest) then skipped June, July & August the government may well be out more than the $24,000.

You have to keep in mind that business operators collect this tax on behalf of the government. It is not the business owners money to spend, but yet most do spend it keeping their cash flow moving. When it comes time to pay they have already spent it and cannot make the payment, therefore the delay remitting. Get behind on one it makes it very hard to catch up which gives you the 2nd one behind.

Restaurants are very high risk.

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