Golden Star
Harmonized Sales Tax on the way
Published: July 28, 2009 9:00 AM
In a surprise announcement last week, the B.C. Liberal government has decided to implement the Harmonized Sales Tax in the province by July 1, 2010.
The Harmonized Sales Tax (HST), intended to boost investment and job creation, will combine the current GST and PST to a single sales rate of 12 per cent.
In a government release, Premier Gordon Campbell said, “This is an essential step to make our businesses more competitive, encourage billions of dollars in new investment, lower costs on productivity and reduce administrative costs to B.C. taxpayers and businesses. Most importantly, this will create jobs and generate long-term economic growth that will in turn generate more revenue to sustain and improve crucial public services.”
The HST, which has gained criticism from the opposition, is estimated to remove over $2 billion in costs for B.C. businesses. Similar to PST exemptions, the B.C. HST will provide consumers with point-of-sale rebates on a number of products including gasoline and diesel fuel for motor vehicles, books, children’s-sized clothing and footwear, children’s car seats and car booster seats, diapers and feminine hygiene products.
NDP MLA Norm Macdonald says he has two major concerns about the HST.
“During the last election the B.C. Liberals were asked if they would be interested in the HST and they said it wasn’t in their platform. They also said the merging of the taxes would be of major concern to them.”
“Frankly, a lot of it was driven because Ontario decided to go,” said Premier Campbell, adding, “I think it was the end of March. When the election took place, it wasn’t even on our radar. We went through this, and we found at the end of May, with the challenges we faced in terms of provincial revenues, the opportunities that were created by this new flexibility and the clear commitment from the federal government to make this transition help just made sense. This was a sensible move, time for us to act. And there is a very narrow window for action. This would normally be something we’d be doing during the budget. The reason we’re doing it now is we have to get on the Ontario track for July 1 or we lose the opportunity for two years.”
Along with the Campbell government’s sudden change of heart, Macdonald says he is concerned about the lack of public consultation and the confusion over all of the services that will be affected by the HST.
“There are a lot of things that the PST does not currently apply to; hydro and heat, restaurant meals, landline phone lines, funerals and bicycles to name a few. The indication is that all of these things will now have a 12 per cent tax on them. The PST exemption on these items was meant to ease the burden on lower income individuals and families.”
Macdonald says that for a province with the highest rate of child poverty, adding a tax is a burden that in certain areas will be detrimental. He also explained that the HST will be a big blow to many sectors in B.C.’s economy.
The tourism and restaurant industries are two such sectors that have voiced concern over the HST.
“The move to a new tax came as a complete surprise to the tourism and food service industry. Gordon Campbell’s failure to consult with consumers or businesses is completely unacceptable,” said New Democrat tourism critic Spencer Herbert.
Herbert noted that the food service industry could be hit particularly hard by the Campbell government’s new tax, which is estimated to result in $750 million in lost sales per year, or $50,000 for the average restaurant.
“This sudden reversal caught consumers and many small businesses by surprise. During the campaign, the B.C. Liberals said they were opposed to the HST,” said New Democrat finance critic Bruce Ralston. “With small businesses and families across the province struggling to make ends meet, now is not the time to catch British Columbians off-guard with a new tax and no consultation.”
The HST announcement is a positive signal that B.C. is open for business, according to Canadian Manufacturers & Exporters.
“Ultimately, this announcement will help make BC exports more competitive in global markets,” says Craig Williams, vice president of CME British Columbia. “We are pleased that the government is working with our sector and look forward to achieving full harmonization as it will improve cash flow and reduce the paper burden on businesses. It’s critically important that the manufacturing and exporting industries remain vibrant, thereby ensuring B.C.’s ongoing economic prosperity.”
The federal government will provide British Columbia with $1.6 billion in transitional funding in recognition of the improvement this change will make to business competitiveness in Canada. The full cost of administration will be borne by the federal government, saving the Province an estimated $30 million annually in administration costs.
The proposed HST will include:
* Unlike any other province, B.C. will provide an automatic point-of-
sale rebate so consumers do not have to pay the provincial portion of
the HST at the pump for purchases of gasoline and diesel fuel for motor
vehicles, including any biofuel components.
* A partial rebate of the provincial portion of the single sales tax for
new housing to ensure that new homes up to $400,000 will bear no more
tax than under the current PST system, while homes above $400,000 will
receive a flat rebate of about $20,000.
* A refundable B.C. HST Credit paid quarterly with the GST and carbon
tax credit to offset the impact of the tax on those with low incomes.
* A temporary delay in the provision of input tax credits for certain
purchases by businesses with taxable sales in excess of $10 million.
More than 130 countries, including 29 of the 30 OECD countries, along
with four Canadian provinces, have adopted taxes similar to the HST,
called value-added taxes, which reimburse most businesses for the tax
they pay on their inputs. With B.C., six of Canada’s 10 provinces will have a similar sales tax by July 1, 2010.
B.C. will have the lowest Harmonized Sales Tax (HST) in Canada. All other provinces with an HST, and the one proposed by Ontario, have a rate of 13 per cent.