Some of you may remember a while back I did my own personal rundown and observation of the HST referendum in British Columbia. It was done just a few days after the last mail-in day. However the wait to find out the final result seemed to take forever. Nevertheless the result was made public since Thursday. The citizens of British Columbia voted ‘Yes!’ to extinguishing the HST. The decision was 55%. However there are many economists that believe that reverting from the HST back to the GST/PST system will have both positive and negative impacts.
On the positive side, many businesses will like the reversion back to the GSTR/PST system. I myself have heard of many business owners talk of how unhappy they are with the HST system and how it cost their business. In fact a recent article in the Vancouver Sun written by Don Cayo said that restaurants and the builders of high-end homes should the most notable businesses to win big with the reversion. The total tax customers pay retailers will definitely boost sales businesses. Customers themselves will now have to pay less like they did in the days of the PST/GST.
Even though it was noted a while back that businesses should will big on the customer end of things, they will face higher costs as the PST they pay on the items they buy to run their business will either be swallowed or more likely passed to customers. Even back in the original days of the PST, there were some mind-boggling complexities like in the case of tax exempt items like children’s clothes or for women’s dress fabric. Also one economist pointed out it will cost $30 million to reinstate an infrastructure that was split. Also under the HST, businesses could report and remit taxes twice a year instead of multiple times with the split tax system. There’s even the case liars may take advantage of the old system again. Even in the case of manufacturers, costs they used on materials are rebated with the HST but weren’t in the PST days.
As a BC citizen, I too know about experiencing the HST. As annoying as it is to pay 12% on things that used to be only 7% or 5%, I am open to insights on both sides of things. I’m glad Cayo repeated those points that were commonly spoken by economists and business people. Whatever happens in the future, it will be a gradual process. BC Premier Christy Clark promised that the HST will be extinguished by March 31, 2013. What it paves for the future of British Columbia, only time will tell.
Cayo, Don. “Return to PST may be costly – and complicated.” Vancouver Sun 27 August 2011 <http://www.vancouversun.com/business/Return+costly+complicated/5317119/story.html >
Hi. I know it’s been a while since I wrote something, especially of substance. So here I am getting back into the swing of things with my latest article. Hope you like it.
If you’ve lived in BC this past year and a half, you may have known for a long time about the most heated three letters in the province: HST. The tax came from nowhere, became part of BC faster than you think and is now up for public vote after a year of existence. The tax and the craziness surrounding it is both frustrating for the citizen and cartoonish in the media’s eye. Even more surprising is that the referendum involving the HST isn’t your typical ballot-and-booth referendum but a mail-in referendum lasting a full month. Most BC residents may not know a whole lot about this Harmonized Sales Tax but it sure has been far from harmonious in BC.
What few people know is that British Columbia is currently one of five provinces with an HST. The others being New Brunswick, Newfoundland and Labrador, Nova Scotia and Ontario. Actually it was the Atlantic Provinces who worked back in 1996 in having a Harmonized Sales Tax implemented in order to lower the amount of tax a citizen would have to pay. This resulted in a 15% HST that came into existence on April 1, 1997. When the GST lowered to 6%, the HST went down 1% to 14% and would go down to 13% when the GST was reduced to 5%. It was noticed that the price of goods fell when the HST came in. In fact one of the things in changing from a cascading tax to a value-add tax was to reduce income taxes, and instituted direct transfer payments (refundable tax credits) to lower-income groups, resulting in lower tax burdens on the poor.
The benefits of the HST were appealing. Even Prime Minister Stephen Harper government said of tax harmonization: the single most important step provinces with retail sales taxes could take to improve the competitiveness of Canadian businesses.” However it was in 2010 when the HST was implemented in BC and Ontario that the drawbacks came to light. It made businesses hard to manage and property values hard to maintain. Many food expenses which had either to the one tax or neither tax became more expensive. The price of gas increased. Services like haircutting and dry cleaning which had only one tax saw the raised price. Some items in BC, like public transportation, ferry costs and toll-bridge tolls. Children’s clothing, child-care items and feminine hygiene items were also exempt. Nevertheless the expenses that were already added were noticed soon enough.
In BC, the brouhaha about this tax is not just simply its existence but its introduction and implementation. It was first reported back in June 23, 2009 that the BC government under the leadership of Gordon Campbell intended to harmonize the two taxes. Full attention to this tax didn’t come until after the 2010 Winter Olympics in Vancouver had ended. Before it was to be implemented on July 1, 2010, the raucous was not only raised by BC citizens but former premier Bill Vanderzalm in campaigning to get the HST abolished. After the HST was made official in BC, Vanderzalm still continued on his campaign while Gordon Campbell’s popularity soon dipped to single-digit percentages, leading him to retire.
Now the fate of the HST lies in the hands of the citizen of British Columbia. All registered BC voters including myself were sent a mail-in yes/no ballot in which one is to vote not on keeping the HST but on abolishing the HST. The deadline for mailing in the vote was Friday July 22nd. During that time, there has been many pro-HST and anti-HST rhetoric. Those against the HST would speak of their drawbacks, most notably the increase in expenses for BC citizens and the businesses that have either faced huge economic difficulties or closed. The common citizen should also have its own experience with the HST in the past.
Those for the HST have come from economics or other sources that have studied the HST in the past. On May 4, 2011, an independent panel commissioned by the BC government released a report on the impact of the HST in BC. The report concluded that “Unless you are among the 15 per cent of families with an income under $10,000 a year, you’re paying more sales tax under the HST than you would under the PST/GST: On average about $350 per family.” The report also predicted that by 2020, the HST is anticipated to result in a BC economy that will “Be $2.5 billion larger than it would be under the PST. That’s about $480 per person or $830 per family.” There was even a prediction from the University of Calgary that the HST will lead to 600,000 more jobs in the next ten years. Economists have even spoken of the potential damages and drawbacks that could happen if the HST is abolished.
Anyways the referendum is over. If you didn’t mail your ballot in by now, tough cookies. Time will tell what the result of referendum will determine. Time will also tell which tax system was supported by the people and whether it will pay off in the long run. Stay tuned. The future of BC and its economy will be decided.
WIKIPEDIA: Harmonized Sales Tax.Wikipedia.com. 2011. Wikimedia Foundation Inc. <http://en.wikipedia.org/wiki/Harmonized_Sales_Tax>