Canada's small business owners fear a consumer backlash when the new harmonized sales tax takes effect in British Columbia and Ontario next year.
"At a time when consumers have seen their savings wither away, additional taxes on some goods and most services is another reason to stop them from opening their wallets," the Canadian Federation of Independent Business said in reporting results of a survey of 3,000 of its Ontario members.
The move to harmonize the federal Goods and Services Tax with the provincial sales taxes will benefit businesses by cutting down on paperwork and increasing tax credits.
However, 75 per cent of business owners who participated in the survey said the impact of the increased tax burden on consumers will be harmful.
Once the provinces combine their provincial sales taxes with the GST, the new tax will be 13 per cent in Ontario and 12 per cent in B.C.
The CFIB said 22 per cent of those surveyed reported that their bottom lines will improve because of the higher tax credits.
But only 6 per cent said their prices will be more competitive as a result of those increased tax credits.
And with the harmonized sales tax covering a broader array of goods and services, consumers will likely balk when businesses add the new tax to their prices.
"With Ontario's economy on the mend, business owners cannot afford to raise their prices," the CFIB said.
In a report last week, Toronto-Dominion Bank economist Don Drummond put a price tag on the value-added taxes the two provinces plan to introduce on July 1, calculating that the tax rate on consumption will jump 1.5 percentage points for consumers.