CRA-GST-ITC and other four letter words

There is a section in chapter eight of my book called CRA-GST-ITC and other four letter words. It describes a potential liability issue hanging between Lease/Owner operators and Trucking companies. The example I used has the potential to affect up to 40% of operators. The chapter explains the instigators are hard to determine but the potential outcome may still be disastrous for operators. The liability to operators is completely at the mercy of the trucking companies. The book further emphasizes the critical need to trust the company you work for.

GST is a simple application. However, the application of the tax is still not consistent across Canada. For instance, most trucking companies deduct GST off operator’s settlements while some do not. As in this case the inconsistent application of GST can be hazardous to the company. The practice of not deducting GST off settlements is rare. I would put it at less than 1% and in this case the “potential liability” may rest on the company rather than the operator. It’s not that they are doing things unethical it’s just not how the GST ACT is (and has been) written, interpreted and applied.

If you are an operator with a company that does not deduct GST... DON”T WORRY! You are safe and well within your rights not to claim the GST ITC’s. Even though over 95% of other companies do deduct the GST, your “employer” did not set things up to shaft you.

After a close and careful look at the thought process to either apply GST or not, one must only conclude that the company chose not apply it for honest and ethical reasons. There is no sense in charging GST to someone who only goes out and claims it back immediately. That is a logical and prudent interpretation of business activity. However, as we know, CRA is neither logical nor prudent. The entire GST application is designed to apply tax to as many applications as possible.
There was a small example I used in my book where CRA tried to apply GST to a deduction that a company took off operators settlements. It was a “lump sum” wage for a driver(s). It would have sent hundreds of thousands of dollars to Revenue Canada, only for operators to fill out their pretty pink form and get it back three months later. I think the idea sprung from the “Department of redundancy department”. The trucking company shuffled their numbers around and just ended up paying less to operators who used company drivers, thus doing an end run around the application (smart guys!)

However, the question still remains, why does CRA apply GST to as many things as possible? Simple, so they can have the opportunity for operators to overlook rebates or for CRA to refuse ITC’s in an audit. Apply as much GST to everything, then see how much can be “dis-allowed”.
GST was never intended to be a burden on businesses… but its ending up that way.