I am writing in an effort to correct some misconceptions that seem to have arisen in B.C. about the HST, particularly as we, the electorate of B.C., will be going to referendum on this issue in June.
The B.C. harmonized sales tax, a merging of federal GST and provincial PST, was implemented on July 1, 2010 to bring B.C.’s consumer taxation in line with that of Ontario, Nova Scotia, New Brunswick, and Newfoundland. B.C. received a $900 million federal grant, with a further $700 million balance (totalling $1.6 billion) to be paid to us next year. What many people have ignored, but must be remembered, is that the implementation of the HST (a discretionary tax paid based on an individual’s spending decisions) coincided with a lowering of B.C. personal income tax (a compulsory tax about which individuals have no choice or ability to avoid). B.C. now has the lowest provincial personal income taxes for all income ranges up to $140,000 per annum.
First of all, the HST is not an additional tax of 12 per cent, but instead replaces the five per cent GST and seven per cent PST. It is, however, levied at 12 per cent on some items which previously only incurred five per cent GST, including restaurant meals, airline tickets, house renovations, funeral services, and a number of other household and consumer goods. It reduces tax on, among other things, diapers, alcoholic beverages, home heating and electricity, hotel and motel charges, and new homes over $525,000.
Secondly, HST eliminates the PST previously paid by B.C. employers, and is fully recoverable by them, allowing a seven per cent reduction in many expenses of business, and therefore enhances their ability to survive and thereby maintain employment for the B.C. workforce. This is particularly true for our forestry, mining and tourism industries. In addition to maintaining or improving employment in B.C., the HST affords B.C. business the opportunity to remain competitive in poor economic times by passing on some or all of these cost-savings to us, the consumers. Market forces and competition from within and outside B.C. should, and according to the basic principles of economics, will cause these savings to continue to be passed on to consumers in the future.
Thirdly, the economic expectation is that B.C.’s annual share of net HST revenue will be $5.4 billion, instead of PST revenue of $5 billion. This extra $400 million we consumers will pay is more than offset by the income tax reductions we will all enjoy, plus federal and provincial HST credits, plus the $1.6 billion federal grant mentioned above. The result is a revenue-neutral HST when compared to the GST and PST it replaces. As our economy improves, greater consumer confidence and spending should increase these revenues, and at that point a politically-sensitive provincial government would be wise to reduce the HST rate to 11 per cent or less.
Lastly, HST is discretionary, in that we, the taxpayers, have the ability to avoid certain spending and therefore avoid paying this tax. We don’t necessarily have to buy that expensive newer vehicle or electronic gadget or all those restaurant meals. On the other hand, we don’t have the ability to avoid paying income tax but that unavoidable tax has been lowered by the provincial government over the past several years and we’re already enjoying, and will continue to enjoy, those savings. In addition, low-income families and seniors also receive federal and provincial HST credits.
Before the referendum arrives, we should review the facts, not the rumours, and make personal, informed decisions about whether the B.C. HST is a long-term benefit to us all. Personally, I think it is.
Peter Moore, C.A.
Vernon
