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30 Second Real Estate Analyzer

7.05.2010

HST FACT SHEET

Here is some of the progaganda that the Province of Ontario is putting out to put a positive spin on the HST which came into effect on July 1st. Do you think that the HST will benefit Ontarions?


Benefits of HST:
HST offers many advantages to business and consumers ranging from simplifying tax compliance for businesses that will save an estimated $500 million annually in reduced administrative costs, to the elimination of approximately $5 billion in embedded PST that businesses absorb annually, reducing the pre-tax retail price to individuals.

It is anticipated that 80 per cent of business savings will flow through to consumers in one year.

The combination of sales tax harmonization, the reduced corporate income tax, and the elimination of capital tax is expected to result in 591,000 net new jobs and $47 billion increase in capital investment within 10 years.
It has been said that the implementation of a single sales tax would bring Ontario into line with “what is viewed as the most efficient form of sales taxation around the world.” Converting the PST into a value-added tax and harmonizing it with the GST would reduce the cost of goods that Ontario exports making Ontario more competitive.

This is an excellent time for HST implementation. As businesses are getting back on their feet and beginning to recover from the challenges of the past few years, they will be looking for the most efficient and cost-effective places to do business.
Having the HST in place will attract businesses to Ontario. There will also be $1.1 billion in income tax cuts, by reducing the first tax rate from 6.05 per cent to 5.05 per cent in 2010; tax rates for small businesses to be reduced from 5.5 per cent to 4.5 per cent to help small businesses thrive in Ontario. The combination of these two tax initiatives will create more jobs, generate consumer spending, reduce administration costs of having two separate taxes and therefore lower costs for consumers.

Small and medium-sized enterprises (SMEs) are the backbone of Ontario’s economy, representing over 95 per cent of all businesses in Ontario, almost 60 per cent of Ontario’s employment and almost 50 per cent of Ontario’s GDP. By harmonizing the two sales taxes businesses will save administration costs which will result in lower pricing.

A value added tax system, such as HST or QST, is a model that has been implemented by many countries and several Canadian provinces.
Business clients will be able to claim input tax credits for the HST they pay in the course of their commercial activities, including the tax they pay on accounting services.

Warren Buffet's two steps to guaranteed investment success

Warren Buffett writes that it only takes two things invest successfully – having a sound plan and sticking to it – and that of those two, it's the "sticking to it" part that investors struggle with the most. These themes were tackled in two recent columns in the Globe and Mail Report on Business:
The first column offered advice from Benjamin Graham, the father of value investing and considered the single most influential investor of the past hundred years.

1. Bring discipline and process to investing
Warren Buffett has said about his professor "Ben Graham taught us to look at stocks as businesses, use the market├ó€™s fluctuations to your advantage and seek a margin of safety. A hundred years from now, these will still be the cornerstones of investing."

2. Seeking a margin of safety, something that Graham believed was the most important principle of investing.

The margin of safety is the gap between what you can buy a stock for and what Graham called its intrinsic or true underlying value. What the margin of safety does is give you a buffer should the company run into unanticipated problems or the market as a whole go into a decline.

3. Elements of sound investments

In Graham's view, the bigger the gap between a company├ó€™s stock price and its intrinsic value, the safer an investment and the greater the likely return.
Graham advocated seeking out companies with strong balance sheets, conservative financing, solid profit margins and strong cash flow; he was an especially strong proponent of companies that paid dividends that regularly rose.
The second column focused on the obstacles to investment success, based on insights from the field of behavioural finance:

1. Overconfidence
When it comes to long term investing success, the biggest problem stems from investors overconfidence in their investing knowledge and ability.

Many do-it-yourself investors believe that by nimbly jumping in and out of stocks, they can beat the market. Research into the records of heavy traders at a discount brokerage firm discovered was that there's an inverse correlation between the amount of trading and investor returns – the more trading you do, the lower your chances of success. And even if investors do show a paper profit, often commission costs turns that into a loss.

The researchers' conclusion: "Excessive trading is dangerous to your wealth."

2. Herding
A second trap is "herding", also known as the "lemming effect".
It's hard to stand on the sidelines while everyone around us is making money – or conversely to be in the market losing money while people we talk to are safely on the sidelines.

3. Anchoring
Anchoring makes us fixate on the price we paid, regardless of whether that price is still relevant We have a tendency to latch on to what we paid or what something was worth at its peak, even after the world has changed; some investors held Nortel all the way down, waiting for it to get back to $60 or $80.

4. Regret
Another issue is regret. Research shows that investors experience more pain when they lose money than satisfaction when they make it; that's one of the drivers of risk aversion. That's why people hang on to investments that are underwater, avoiding the pain of selling them and then when they do finally sell, they often do it all at once to get it over with.

5. "We have seen the enemy and he is us"
In a Jump Start interview earlier this spring, I talked about investors' emotional responses to market movements and the resulting tendency to buy at the top and sell at the bottom – and referred to Walt Kelly's famous line from his cartoon strip Pogo: "We have seen the enemy and he is us."
This line is equally true when it comes to behavioural finance traps. The good news is that awareness is the first step to change – and growing understanding of the behaviours that undermine investment success means advisors are better positioned to help clients avoid them going forward.

Your Personal Tax Planning Guide 2009/2010

New Download on personal tax planning added to Multiple Egg Baskets.