Monday, May 23, 2016

The Tax Man's Salami

Recently, I picked up a few grocery items at my local supermarket.  Now that I have your rapt attention thanks to that riveting opening, I'll proceed to explain that most grocery products aren't taxable in the province of Ontario, where I live, the significance of which will become clear momentarily.

At the checkout, I asked for a plastic bag, as there was too much stuff to carry free-hand.  In Ontario, most grocery stores; in fact, most stores of any kind (though not all) add a small charge for plastic bags.  They pass this off as a "green" initiative, intended to save the environment by encouraging customers to bring along their own re-usable bags rather than accumulating disposable plastic bags which only wind up in landfills, as opposed to calling it an additional cash grab, which is what it is in actuality.  This post, however, is not a rant against stores that charge for plastic bags.  There's been a sufficient number of other writers who have ranted about this practice at least as eloquently as I could hope to.

Looking over my grocery receipt later, I saw the charges for the various grocery items, a five cent charge for the plastic bag, and a one cent charge for H.S.T.; Ontario's harmonized sales tax.  Recall that most grocery items aren't taxable in Ontario, so the item that was being taxed was the five-cent plastic bag.  But there's a problem with this.  You see, Ontario's H.S.T. rate is thirteen percent (which includes 5% G.S.T. plus 8% P.S.T.).  Thirteen percent of a nickel is .0065 cents.  So the tax amount was rounded up to a penny.

"But of course," you may be thinking, "that seems reasonable since, in North America, a  penny is the smallest possible monetary unit.  Unlike Olde England, we don't have halfpennies.  In fact, technically, we don't even have pennies anymore!  So the amount has to be rounded up.  Still, one cent added to a five-cent charge amounts, in fact, to a 20% tax, not a 13% tax.  I had been over-taxed by 7%.

"Come off it," I hear you chide, "it's only a penny man!"  Maybe so, but how many other people conduct similar transactions during the course of a day, a week, a month and a year?  How much extra money are the Ontario and Canadian governments raking in thanks to this kind of over-taxation?

Many of my readers will have heard the story of a rogue Programmer who apparently worked for a bank, and altered the program which posted bank transactions to divert any rounding differences to his personal bank account.  The story goes that, after initially accumulating a healthy sum, he was eventually found out and jailed for fraud.  While the story itself has become something of an urban legend, given that the specific Programmer and bank in question are either not named or, if they are, there is disagreement about their identities, the common consensus is that the story probably does have some basis in fact.  Even if it doesn't, most authorities agree that this type of activity would definitely be fraudulent and illegal if it did occur.  The practice has even been given a name; "salami slicing".

But if taking the fractions of cents that result from rounding, which don't actually belong to anyone and which no-one is going to miss, is fraudulent, how then can the government justify rounding up a fractional tax amount to a full cent and keeping the difference?  Isn't that the same thing?

As is often the case, it appears that different rules apply to government as opposed to the citizenry.  Ironically, salami, being a grocery item, is not taxable, at least not in Ontario.

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