Nathan Slee Archives

The HST: How Far Will BC Go?

Post by Nathan Slee in

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swords
Will British Columbians fall on their swords just to teach Gordon Campbell a lesson?

Given the involvement of the City of Vancouver in the harmonized sales tax protest, we thought that this commentary by businessperson Nathan Slee was apropos to CityCaucus.com...

As former Premier Bill Vander Zalm and his coalition of HST fighters move closer to their goal of forcing a referendum, British Columbians will soon have to decide if punishing Gordon Campbell is reason enough to derail an otherwise good tax policy.

Here is what we know: Gordon Campbell did not campaign on the HST. The policy was announced ridiculously close to the election. There was not nearly the kind of consultation that British Columbians deserve. Understandably, many British Columbians are upset.

We also have a reasonably good idea of how the HST will impact the BC economy and consumer prices. In the Maritimes (where sales tax was harmonized in 1997) and in Europe (where a value added sales tax was first introduced in France in 1954), the introduction of a value added sales tax resulted in increased business investment (read: jobs) and a slightly lower average cost of goods and services.

Opponents of the HST are calling it a $2 billion dollar tax shift from businesses to consumers. This is inaccurate and misleading. Supporters of the HST who claim that business savings will be entirely shared with the consumer, making the tax shift essentially a wash, are also being unrealistic. The truth is somewhere in the middle. No, not every business will pass on savings to their consumers, but enough will that we will notice. And it will not take much of a drop in the average cost of goods in order to balance out the increase in sales tax that will be placed on some goods and services.

Most of what we consume is already subject to both GST and PST so the harmonization of these two taxes will have no impact on the level of sales tax that we pay for those items. Under the HST, the majority of what we consume will be at least slightly cheaper to produce/deliver due to the input tax credits that businesses will receive. Only a minority of goods and services, where PST is not currently charged, will be subject a 7% tax hike. Because almost all of our goods and services will be cheaper to produce, but only a minority of them will be taxed at a higher rate, a small decrease in average prices will be enough to compensate for the few goods and services that will be taxed more heavily.

It is true that the harmonization of our two sales taxes will not impact everyone equally. Few tax changes ever do. Yet the HST is undoubtedly a more efficient and competitive way to tax our spending than our current GST/PST structure.

So where does that leave us?


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