British Columbia's HST Referendum

It may be difficult for the BC government to draw up concrete plans because it has just announced a mail-in referendum on the Harmonized Sales Tax. Specific details on the timelines and important dates are outlined below.

In early April, three members of the B.C. Liberal cabinet unveiled a $1.7 million funding package to spur the discussions, but critics charged the new rules were skewed in favour of keeping the HST.

The government has also provides half a million dollars to be split equally to fund the Yes and No sides of an information campaign. Another half a million dollars will fund several forums at universities about the tax, and the government will spend $700,000 more to create a mail-out Voter’s Guide that outlines both sides of the debate. They include the findings of an independent panel appointed by the B.C. government to look into the HST. In early May, the panel warned that killing the HST would cost more than half a billion dollars a year and force the province to repay as much as $1.6-billion to Ottawa. Currently, it is difficult to say whether or not B.C. will have to pay it back in full. Premier Christy Clark has said that she would fight to minimize the money the province will owe the Federal Government if the public votes to defeat the HST.

The HST referendum is very interesting insofar as the public gets to make a direct decision on a complex taxation policy issue. On the surface, it might appear to be a no brainer; no one likes paying taxes and Statistics Canada found that the HST added about $521 to the tax burden of the average household. On the other hand, the panel’s report estimated that the HST would bring in an extra $820-million a year in 2013-14 and $893-million in 2014-15 and that going back to the PST would cost the province $531-million in lost revenue in 2013-14 and $645-million the 2014-15. Finding a way to fill way to bridge the deficit could be equally unpopular. According to their calculations, the HST would also create nearly 25,000 jobs by 2020.

Yet there may be a deeper fundamental issue: all sales taxes are what are known as regressive taxes. That is, they tax people not on their ability to pay, but on their spending whether discretionary or not. They can be viewed as unfair because the wealthy have more discretionary income than the lower income while they spend more, low income persons still have the same basic requirements and the impact of a regressive tax is disproportionally harsh for them.

According to a recent report by the Canadian Centre for Policy Alternatives (CCPA), the richest one per cent of Canadians have an average income of over $400,000 and collectively account for about 14 per cent of the income in the country, about twice their share 35 years ago. While the rich have seen their incomes rise, they have not seen their share of tax burden increase… According to the CCPA, the lowest earning 10 per cent of tax payers saw their overall tax burden increase by about five per cent between 1990 and 2005 while the top 10 per cent saw a decrease of about four per cent.

Perhaps most interesting is the suggestion that the Government might be willing to make some concessions to make the HST more appealing to voters: “Are we looking at making changes to engender more public support for HST? Absolutely,” said Finance Minister Kevin Falcon in mid-April.

He said if it means changing the terms of the tax, potentially in the form of more provincial rebates or dropping the tax rate by a couple points, that would be seriously considered.
“The government is committed to a position of improving the HST prior to the vote being made on June the 24th,” he said, repeatedly adding that changes would still have to result in a balanced budget.

CARP has and continues to emphasize the need for remedies that respond to the unique financial circumstances of retirees and those on fixed income. As of yet, the B.C. government have made no specific provisions to protect seniors from the repercussions of the HST.
In 2009, a CPPA report dubbed seniors HST “losers” in the report since, on average, senior couples will be worse off by approximately $150. The report found that 45.5% of senior couples with combined (annual) income of $20,000 to $50,000 could expect to pay (an average of) $270 more. It also revealed that “even at incomes under $20,000, about 8% of families will experience a loss” and made note of the fact that “other analysis suggests that these tend to be families whose current consumption is close to, or exceeds, their current income. For example, seniors who support their current consumption by drawing down savings will tend to show losses because their consumption exceeds their current income.”

While the report’s central conclusions support the provincial government’s assertion that the HST would amount to negligible cost increases for consumers; it underscored the differential impact that the HST will have on seniors.

For its part, CARP calls on the BC Government to implement an HST relief grant for low and middle income seniors. Stay tuned to CARPActionOnline for developments on this issue.

Dates n’ Details on the B.C. HST Referendum

Elections BC will be mailing referendum ballots for the HST to all registered voters on June 13, and by June 24 the majority of British Columbians are expected to have received the ballot.

The referendum question will be: “Are you in favour of extinguishing the HST (Harmonized Sales Tax) and reinstating the PST (Provincial Sales Tax) in conjunction with the GST (Goods and Services Tax)? Yes/No.

The last day for unregistered voters to request a ballot from Elections BC will be July 8, and by July 22 completed ballots must be received by mail by Elections BC.

The BC government says the results of the HST referendum will not be announced until August.