ING’s new Thrive account vs PC Financial

You will get instant access to an ING Direct savings account (if you have one) through bank machines and point-of-sale purchases once the bank launches its Thrive no-fee chequing account early next year. Some people are already enjoying a trial preview.

I did a column yesterday comparing ING’s no-fee account with President Choice Financial’s account and found some interesting differences.

“No-fee chequing” means you don’t pay for cheques or chequing transactions, in my view. That’s how President’s Choice operates. But ING is giving 20 free cheques at first and making you pay $10 for any 20-cheque order you place in the future.

I think ING is stretching the truth, as frequent poster Bylo pointed out here. But the executive I spoke to said that most big banks give you only one or two blank cheques and charge for the rest.

As usual, my readers had lots of interesting comments, which I’ll post below.

HST inconsistencies annoy readers

It’s still early days for Ontario’s harmonized sales tax, which came into effect on July 1. But many people feel it’s being applied inconsistently or unfairly.

Sharon reads electronic books. She was dismayed to find she was charged 13 per cent HST on ebooks purchased from Kobo, an online store owned by Indigo Books, while she’d pay only the 5 per cent GST on books sold at a regular bookstore.

Slobodan bought a litre of milk at a convenience store in Niagara Falls and was charged 45 cents HST on the $3.39 purchase. Since when is food taxed in this province, he asks? And besides, the calculation is off by 1 cent (13 per cent of $3.39 is 44 cents).

George complains of problems using discount coupons at restaurants. He says restaurants should charge tax only on the net amount after deducting any discounts, but many calculate tax on the gross amount before the discount. The result is inflated taxes being paid unnecessarily. In fact, the rules aren’t quite as clear-cut, if you read the CRA’s guide.

Frank asks why some restaurants still charge 15 per cent tax on liquor. Didn’t the Ontario government remove the liquor tax and substitute the 13 per cent HST? Yes, it did, while promising to recover the taxes lost through higher markups at the Liquor Control Board of Ontario stores.

Jim and Anita can’t understand why their hydro bills — already high enough with the added HST for actual use — also have HST added to the delivery, regulatory charges and debt retirement charge. “For senior citizens on fixed incomes, these added costs are too much. How do low income families manage this hardship?”

Ontarians may grumble, but in British Columbia, they’re rallying to fight HST. I’d like to hear other examples of HST applied unfairly or inconsistently.

Why did Ontario raise the tax rate on private car sales?

Mike, a reader, is angry to see Ontario raise the tax rate on private car sales to 13 per cent (from 8 per cent) on July 1, the same date the HST came into effect.

He’s put together a blog to challenge the change at Red Flag Deals. He’s also written to the Competition Bureau of Canada, Premier Dalton McGuinty, the Ontario Ombudsman and the provincial finance minister and revenue minister. But he hasn’t had much response.

I’d like to publicize this change, which has slipped below the radar, and ask readers whether they think it’s fair or unfair.

Here are nine reasons why Milke thinks it’s unfair:

* The government felt that when private sales are subject to a lower retail tax rate than the rate used in car dealers’ sales, private sales have a competitive advantage. This argument ignored the fact that dealers’ vehicles are before-tax goods, while private sale vehicles are after-tax goods. Dealers’ purchases and expenses are given 13 per cent input tax credits, while no input tax credits are given to private sellers.

* Consumers are being told the tax rate was adjusted because of the HST. In fact, it has no relation to the HST. It’s entirely a 13 per cent provincial sales tax. All communication from the Ontario government about this change is hiding behind the HST banner.

* The 13 per cent PST on private sales depresses the asking price of vehicles because of this double tax. It also decreases the bargaining power of consumers wanting to trade in their vehicles to car dealers. The input tax credits given to the dealers further lessen the costs of the used vehicles to the dealers.

* The 13 per cent PST on private sales lessens the competition to the car dealers by inflating the final prices in private sales with this double tax.

* The 13 per cent PST discourages consumers from repairing their vehicles before a private sale, since all the costs (which attract HST) will be taxed 13 per cent again. Private sellers don’t get any input tax credits, even for the HST paid for the cost of selling the vehicles such as emission, certification and advertisement. Car dealers, on the other hand, recover all their HST paid through input tax credits from the government.

* The effective HST rate on dealers’ used vehicles is not 13 per cent. It’s 13 per cent on the profit portion only. HST is a tax on “added value” and PST is a tax on the gross.

* The level playing field justification is simply not true when the field in favour of the car dealerships was 8 per cent, now increased to 13 per cent. The real effect is that consumers have increased car costs, with the burden being split between government taxes and dealers’ profits. This tax created and has now increased the unleveled playing field in favour of the car dealers.

* At 13 per cent, the high PST rate hurts consumers’ rights to fair pricing, whether disposing of their used vehicles in private sales or trading in to car dealers.

* The government insisted on fighting illegal curbsiding with the tax, while ignoring the fact that legitimate private sellers will be hurt. The use of a tax to combat an illegal activity is not a substitute for proper laws and enforcement and victimizes legal private sales activities.

The major misconception about this tax is that it’s a “retail tax”. But in reality, it’s a double tax; it’s tax on tax-paid goods. It is a transfer tax. Buyers pay it, but it’s the private sellers that have to REDUCE the asking prices to allow for this tax.

This transfer tax is not applicable if you trade into a car dealer, because the government gave you the (input) tax credit for trading in.

Mike believes the tax rate change was a result of intense lobbying from the new car and used car dealer associations. When car dealers and private sellers are competitors, if you penalize one side you benefit the other.

Not only were special favours provided to the car dealer associations, but Ontario is also raising significant tax income — with few complaints from the public.

Were the TFSA rules explained properly?

Who can forget the uproar last June when 70,000 Canadian taxpayers were notified that they owed penalties for breaking the rules on their tax-free savings accounts?

I argued in this post that the government and financial institutions didn’t do enough to tell Canadians how to manage these new tax shelters.

Why didn’t they go out of their way to warn everyone not to take money out of a TFSA and replace it in the same year? Why didn’t they spell out the stiff fines that would result if you used the TFSA as a bank account?

Now that the penaties are being reversed, others are coming to agree with me that the TFSA rules need to be fleshed out.

Evelyn Jacks, tax author and expert, polled her readers on this question:

Do you think the rules for utilizing tax-free savings accounts are clear?

She received 58 responses — 18 said yes and 40 said no.

It’s significant to note that the tax and financial professionals who took her survey represent not only their own views, but those of thousands of clients.

One adviser said all his clients had questions about the TFSA. Even he found there was no up-to-date and official source that clearly explained them.

MoneySense magazine has an online feature, asking people about TFSA questions and seeking advice from a tax pro. There’s also a quiz in the current issue, exploring common myths about TFSAs.

A question posed by one of my readers stumped the CRA’s spokeswoman, Caitlin Workman, until she checked it out more thoroughly.

Here’s what he asked:

Suppose I put $5,000 into my TFSA this year and earn $1,000. I take out the $6,000 before year-end and put it back on Jan. 1, 2011.

How much is my new contribution limit next year? Is it $5,000 or $4,000?

This man had called the CRA and was told he could contribute only $4,000 in 2011, since the $1,000 in interest earned and withdrawn in the previous year would be deducted from his new limit.

I said that was wrong. So did tax expert Jamie Golombek of CIBC, whom I consulted. Eventually, Workman backed down and said the reader had been given misinformation.

Let’s hope the CRA and the financial institutions learn a lesson from this mess.

Make sure the rules are crystal clear. Use examples and typical scenarios. Tell clients over and over again.

There’s no such thing as over-communication when it comes to warning people about the possibility of making costly mistakes.

When you’re dealing with a mass market product such as the TFSA, use the mass media to get the message across in a widespread and meaningful way.

Exercise your right to a free credit report

That’s the headline for my column in tomorrow’s paper, which is online here.

I’m annoyed to see Equifax and TransUnion pushing online access to credit reports at their websites (at a $15 fee) and downplaying your right to free access.

I’m also concerned about the heightened role that credit reports and credit scores play in your life as a consumer. They’re not just used to extend credit, but can also determine what you pay for insurance.

Many people deal with companies that are quick to send “overdue” accounts to collection, even if the charges are unfounded. You get a threatening letter from a collection agency and you’re tempted to pay up, just to keep your credit record from being tarnished.

On this blog, you can read about intimidation by companies — such as Rogers, Bell, Direct Energy, Summitt Energy and Premier Fitness — that resort to heavy-handed collection tactics. These become part of your credit history and later count as a black mark when you apply for new credit.

To make things worse, you may not be getting the message to monitor your credit report on a regular basis. Your vigilance is the only check against errors, incompetence and corporate bullying. Only you can ensure that the facts are right.

So, let’s stop credit bureaus from promoting $15 credit reports front and centre on their home pages. They’re bound by law to give you the information without charge. I’d like to see them take this responsibility seriously again.

Canada’s largest bank goes paperless

I know mobile phone companies are going paperless, setting off a lively debate here. But I didn’t know that Canada’s largest bank had done the same thing.

In May, RBC Royal Bank stopped sending paper statements to its personal banking clients. David, who wrote to me, doesn’t remember getting any notice.

I went through a lot of paperwork this past weekend and realized I hadn’t received a statement since April. The May and June statements I printed from the computer, assuming they were lost in the mail.

When I noticed I hadn’t received July’s statement either, I finally broke down and called the bank. It turns out they just decided not to send me statements any more.

The rep explained that it was my responsibility to call them to ask to continue to receive statements. Of course, I got the whole pre-scripted lies about how RBC cares about the enviroment. RBC only cares about this quarter’s profits.

The move came at a time when fees went up. David used to pay $4 a month for 15 debits, plus one automatic payroll deposit, and 50 cents for each additional debit. Now his $4 a month covers 15 debits, but no payroll deposits, and he pays 65 cents for each additional debit.

He also complains that RBC bungled his order of new cheques last May.

I had finished cheque 100, so asked that it start at 101. This was too challenging a request, as the order I received started at 151. I want sequential cheques for my accounting/taxes, so had to call again asking for a correct set to start at 101.

Ellen, you would have thought I had asked for the keys to Fort Knox. The woman on the phone refused, stating I had to go into the branch and give them the cheques starting at 151 before they would order me a set at 101.

I refused. It was their mistake, not mine, I wasn’t going to be inconvenienced. It took over 4 phone calls before someone would help me. The big joke? The next set of cheques came and started at 001!

Another phone call, begging, please, can you submit a simple cheque order for me? Again, the same hassle that I’d have to go into the bank before anyone would help me. As if my whole existence in May and June was planning how to rip off a set of cheques.

Matt Gierasimczuk, an RBC spokesman, promised to send David’s complaints to the client care centre to follow up with him and make sure it wouldn’t happen again.

So, why did the bank move to electronic statements only?

At RBC, we firmly believe that reducing our environmental footprint, and promoting more environmentally friendly practices, products and services, is not only our responsibility as Canadians, but it’s also good business.

Since January 2006, over 4.7 million RBC accounts have switched to eStatements, saving approximately 980 metric tonnes of paper or 28,000 trees every year.

If a client wishes to continue receiving paper statements, however, we are more than happy to provide this at no cost.

David’s response? No, thanks.

I could get them for free, but it’s similar to the Rogers negative option billing fiasco years ago.

Their customers should have to call them to request a change, not have paperless forced on them and have to contact them to get what they were always getting.