November 19, 2009


The B.C. Liberals have managed to offend almost everyone
with their Harmonized Sales Tax.

An Ipsos Reid poll shows almost 9 out of 10 oppose it.
Opposition is higher and more intense than the carbon tax,
says one pollster. "The only time I recall results this
negative is when British Columbians were asked to evaluate
how well the justice system treats repeat and drug
offenders."

The Liberal plan appears to have been written on the back of
a paper napkin.

The plan is poorly thought out and full of bizarre
contradictions. The government says it wants to reduce
carbon emissions yet they propose taxing bicycles and not
gasoline. Why tax school supplies and not children's car
seats? How is a tax on energy efficient products consistent
with the government's climate action plan?

The HST is political dynamite. Taxpayer backlash at the
provincial level is whipping all the way to Ottawa. The
recent NDP win in New Westminster/Coquitlam by Fin Donnelly
is being seen as a repudiation of the HST. Local NDP
candidate Michael Crawford worked on Donnelly's campaign and
was surprised at the depth of hostility to the HST that he
encountered at the doors of voters. The New Democrat
position is economical; in one stance they distance
themselves from the provincial Liberals and the federal
Conservatives and Liberals.

What does federal politics have to do with the B.C., you
might ask?

The HST is a federal initiative. Prime Minister Harper once
spoke fondly of it, not as a casual remark in a Tim Horton's
coffee shop but in his budget of 2008. "Provincial sales tax
harmonization is the single most important step provinces
could take to improve the competitiveness of Canadian
businesses."

After being labeled the Harper Sales Tax, the Conservatives
are backing away from ownership. But it's hard for the
Harper government to claim that they had nothing to do with
the HST when they are giving the province $1.6 billion to
implement it.

Because of poor implementation, Harper is not feeling the
harmony from B.C. Instead of handing the federal money
back to taxpayers, as they did in Ontario, B.C. is using it
to reduce the provincial deficit. Unlike the Maritimes, B.C.
is not reducing the Provincial Sales Tax to ease taxpayer
burden.

Despite being implemented badly in B.C., the HST has merits.
Streamlining tax collection will save the B.C. government
$30 million in administration costs. Combining the tax
modernizes the tax system and makes B.C. more competitive
with competing jurisdictions that have a Value Added Tax.

The old Provincial Sales Tax is unfair because it's
frequently paid a number of times: businesses pay input
taxes that are passed on to taxpayers at each point in the
supply chain. It's possible to pay the embedded PST two or
three times as the product moves to final sale.

The B.C. plan is not all bad news: low income British
Columbians will see some relief. They will receive an HST
credit up to $230 for individuals who make less than $20,000
annually. The same credit would be given to each family
member where the family income is less than $25,000.

However, the HST will not increase business competitiveness
despite the tax windfall. New jobs will not be created,
productivity will not be enhanced, and investment will not
be increased.

Economist Marc Lee of the Canadian Center for Policy
Alternatives explains: "That is because business investment
is not enhanced by efforts to reduce operating costs,
whether through tax cuts or deregulation. Rather, it is a
function of the outlook for sales and profits. No companies
in BC who are looking at cutting costs or laying off workers
will now make substantial new investments on the basis of
the HST."

Exporting businesses will benefit because they can reduce
their input costs but other small businesses will suffer,
especially those who will have to collect 12 per cent tax
instead of 5 from grumpy consumers.

The HST might be justifiable if the money went to pay for
funding of health, education and other government services.
But the HST is a tax in name only. In real terms, it is a
transfer of wealth from taxpayers to businesses. The
government claims that consumers will eventually see lower
prices as businesses pass on the savings but that's
unlikely.

The HST is not generating harmony or sales and it is not a
tax.

David Charbonneau is the owner of Trio Technical.
He can be reached at dcharbonneau13@shaw.ca

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