Taxing Questions: What to Make of BC’s HST Debate

“So, yes, the government could cut it, but at what cost to citizens? I think those are the most important questions that we need to ask. So for me, I think there are things that we can probably do to try and fix some of the issues with the HST, but I don’t see a big rate cut before the referendum.”

Many see the move as an act of desperation, but the government insists that this is the product of public consultation, a “rebalancing” exercise that will shift some of the advantages from business back to the public. An independent panel appointed by the government found that the average family would pay $350 more in sales tax under the HST than they paid with the PST plus GST system—more than the government says had initially anticipated. The independent review panel recently estimated that under the revised HST, B.C. families will pay $120 less tax on average than under the PST.

Revised HST still has businesses singing like Mary Poppins

Some British Columbians are also finding it strange and suspicious that plans to lower the controversial HST by two percentage points over time has met with overwhelming approval from British Columbia’s business community.

“Overall, I think this is probably the best possible news that we could hope for. I think it’s the spoonful of sugar that is going to help the HST go down,” said Laura Jones of the Canadian Federation of Independent Business immediately after the proposed reduction was announced Wednesday by Finance Minister Kevin Falcon in Victoria.

This may be evidence that as CARP has previously stated, businesses had no intention of passing their savings through to consumers, and they still don’t.

On the other hand, others argue that businesses support a modified HST because it is genuinely good for the economy and job creation, and because without it, BC would get left behind.

Softening the blow

Still, these measures, when combined with others adopted by the BC Government, really do take away some of the sting. Despite the fact that they have now made some improvements that will help seniors and those on fixed income, Ontario HST policy was initially was forced through with little to no public consultation.

One of the biggest issues with the implementation of the HST is the gap between theory and reality. The tax was initially supported by academics, business-people and politicians who could see the theoretical efficiencies that might flow from harmonization somewhere down the road, but couldn’t sympathize with what it would do to the little guy’s wallet.

As hypocritical as the BC government’s 180-degree reversal might appear, it does soften the HST’s blow on middle-income earners and on seniors with fixed incomes.

What is the Likelihood that the HST will pass?

It’s still early to say what will happen as commentators, economists and members of the public alike are still familiarizing themselves with the new proposals. However, an Ipsos Reid Survey conducted last week found that 60 percent of British Columbians approve of the fix, while 42 percent say they would now cast their ballots in favour of the tax. The company did explicitly state that they “did not measure the likelihood of respondents actually voting in the mail-in referendum. While overall public opinion on the HST is split, it may well be that one side is more motivated to participate in the referendum than the other.” The anti-HST campaign’s messaging is very negative and emotional, which tends to mobilize voters more than rational positive discourse.

Globe and Mail readers, on the other hand, were heavily in favour: click here to read that story . 67% of poll respondents indicated they would vote yes while 33% said they would vote no.
In the next issue of CARP Action Online: the pros, the cons and the arguments.