As published in the Times Colonist
September 8, 2009
By: Keith Martin
The announcement that on July 1, 2010, B.C.’s provincial sales tax will be merged with the federal goods and services tax was a bolt out of the blue.
This seven per cent tax increase on everything that was previously exempt from PST was anticipated by no one.
A partial list of the goods and services affected by this tax increase includes: Restaurant meals, tourism services, residential heating, food products (basic groceries will continue to be exempt), prescription medications, vitamins and dietary supplements, bicycles, many school supplies, magazines and newspapers, energy conservation equipment and airline fares, to name but a few.
The timing and execution of this tax has been terrible as it will hurt our tourism, home-building and restaurant sectors, and exacerbate the job losses they have already endured during the recent economic downturn.
The Restaurant and Food Services Association estimates that the HST will cost their industry a staggering $750 million a year. Tour-ism, a major economic driver in B.C., will also be hit hard.
The benefits of the HST include a decrease in the cost to produce certain goods, which could lower the price of these goods to consumers, a reduced administrative burden and a potential increase in investment into B.C.
Other provinces have adopted an HST, but they took a different course than B.C. Atlantic Canada did this in 1997. However, they also reduced their HST from 19 per cent to 15 per cent — and it is now 13 per cent. There was also extensive consultations with various groups in the region to mitigate the negative effects of the tax on their industries. In B.C. this has not happened.
A major impetus behind this headlong rush to implement the HST is the silent hand behind this decision.
It belongs to the federal government, which has offered a $1.6 billion-carrot to the province if they adopt this tax.
This is an irresistible incentive to our provincial government as it has just predicted multibillion dollar budgetary deficits in the years to come. But this incentive will only have a one time, short-term benefit, in contrast to the long-term structural effects the tax will have on many of the province’s major economic drivers.
There are, however, things that can be done to clear the air and ensure that consumers and businesses attain the maximum benefits from a HST without the negatives. To do this, the following should be done:
- 1. Apply the HST only to those products that previously were subject to both the PST and GST. This would not add any new taxes to products that previously were PST exempt, especially those that are essential to people’s lives, such as medical products, home heating, food, etc.
- 2. Drop the HST from 12 per cent to 10 per cent.
- 3. Implement a more effective, streamlined, and efficient tax reporting process that will reduce the enormous administrative burden on businesses.
- 4. Engage in a wide ranging consultation process with businesses and consumers to identify ways to reduce any harm the HST may inflict upon them.
- 5. Importantly, Prime Minister Stephen Harper should assure Premier Gordon Campbell that he will not withdraw the $1.6-billion incentive package the feds offered to our province to accept an HST. This will give the province time to consult widely and implement solutions that will reduce any harm the tax will inflict on our citizens.
There is a saying in medicine, “Do no harm.” This should be applied to politics, too, and the HST is a good place to start applying this dictum.
We must not introduce an HST that could hurt our citizens and our business community. Most jobs exist in the private sector and to harm them, particularly during this economic downturn, will exacerbate our unemployment levels.
Initiatives to mitigate the damaging effects of the HST and enhance its benefits for both the consumer and businesses must be implemented quickly for the sake of our province and its citizens.
Dr. Keith Martin is the member of Parliament for Esquimalt-Juan de Fuca.
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