HST... and the Shore
As the provincial government begins a roughly 18-month process to return B.C. to a two-sales-tax regime, local reactions to the Harmonized Sales Tax’s 54.73-per-cent rejection by voters in last month’s mail-in referendum have been as diverse and divisive as the debate regarding the levy was leading up to the vote.
For instance, North Shore Studios president and HST advocate Peter Leitch said he is disappointed the province will be reverting to the provincial sales tax and (federal) goods and services tax systems.
“The PST was brought in in the 1940s. Since then there is a whole bunch of changes that happened to it to try and make it more fair and to work better for the province but it ended up being a fairly complex piece of legislation,” said Leitch.
One consequence, he said, was that many goods in B.C. carrying a “fair amount” of hidden PST in their prices.
Leitch said he preferred the HST because as a value-added tax businesses are able to remove the hidden taxes from their costs. The HST system also removes the need for two sets of sales-tax accounting.
“Hopefully we can get together and talk about ways to improve the PST so it is a bit more conducive to creating jobs in B.C.,” said Leitch, whose studios employ thousands working on TV shows and movies. “I think with the state of the world economy, we want to be as competitive as possible and continue to have a strong economy so that we can support the increasing costs of our healthcare and education systems.
“We just want to make sure we have a consistent and competitive tax policy here so that we can continue to attract the type of business that has been so good for the province.”
Like most of his colleagues in the provincial wing of the New Democratic Party, newly-minted North Vancouver-Lonsdale NDP candidate Craig Keating said he believes B.C. was better off under the PST-GST regime.
The referendum’s results, he said, demonstrate that the BC Liberals were out of line with voters when they announced that they were going to adopt the HST system so soon after the last provincial election without consulting the public.
“I think the government of B.C. has reaped what it has sown,” said Keating. “It brought the tax in in a highly deceptive and undemocratic way without public discussion and without a high degree of honesty, and I think the people of B.C. have pretty conclusively spoken that that is not how tax policy should be made in this province.
“I am pleased to the extent that we are going to now have the opportunity to have a public discussion, which has not gone on at any time in the last 10 years, about fair and effective taxation in our province.”
With the B.C. government now owing the feds $1.6 billion in transition money — not to mention the costs of re-establishing a sales tax administration and audit department — Keating said Finance Minister Kevin Falcon has a difficult job ahead of him. However, he said, the federal government should be contributing to the solution.
“When the federal government was paying us the $1.6 billion nobody lit their hair on fire and said, ‘Oh my God, the federal government has to give up $1.6 billion,” said Keating.
“I think it is only fair that the province is going to have to figure out a way to pay that back (but) I really think the federal government, as Jack Layton said in the last campaign, is complicit in this whole HST debacle in B.C. and they should probably be forgiving it.”
Locally, the majority of voters in all three ridings produced results out of step with all but 21 other ridings in the province. West Vancouver-Capilano voters supported the HST by 64.52 per cent while North Vancouver-Seymour had 60.59 per cent of its voters support the tax. North Vancouver-Lonsdale saw a closer vote with only 51.84 per cent of voters casting ballots not to extinguish the HST.
The result is, of course, little consolation to the latter’s MLA, BC Liberal Cabinet Minster Naomi Yamamoto, who has been a proponent of switching to a HST system long before her own party changed its policy towards the idea.
“I have actually supported it since I started my small business over 20 years ago and I remember lobbying Paul Martin, as Minister of Finance at the time, saying that a harmonized sales tax would be much more efficient,” said Yamamoto. “So, I am really disappointed for British Columbians but at the end of the day British Columbians have spoken overwhelmingly to eliminate the tax.”
Yamamoto said she was surprised that the vote was not closer, conceding that the manner in which the Liberals rolled out the HST contributed to its early 80 percent disapproval polling numbers, an unpopularity it never surmounted.
“We didn’t do it well but I can tell you honestly that it wasn’t something that we change our minds about,” she said.
“It was a situation where one day we found out that we were going to be $1 billion in the hole from reduced corporate taxes and of course the economy was taking a dive.”
And when the Province of Ontario, gaining concessions from Ottawa, decided to adopt a HST, Yamamoto said, the B.C. government decided it needed to do so quickly as well to remain competitive — an advantage now squandered, she suggested.
“I am not a fan of the PST,” Yamamoto concluded. “I have been in small business long enough to know that it is an archaic hidden tax. It is quite insidious and to go back to the old system is disappointing but we will do it.
“I don’t know what the finance minister is planning ... There will be some tweaks but more administrative, I think.”
One point of discussion is whether the government will reinstate the same PST exemptions that existed before the HST, including restaurant meals, haircuts and services such as junk removal.
Salmon House restaurant general manager Ann Bentley would be happy to see the exemptions return but she is skeptical that they will.
Bentley said the West Vancouver restaurant took a hit when the HST was brought in, adding an extra seven per cent tax to its customers’ food bills — although that was slightly mitigated by a reduction in overall liquor tax from 15 to 12 per cent.
“(The HST) really affected our corporate and tour business quite heavily because we do a lot of group functions and then when you’re all of a sudden saying all food and beverages are subject to 12 per cent HST that is a lot of money,” Bentley said. “It is hard to say by how much because there’s so much going on with tourism and the economy since the recession but it definitely affected large group (bookings).
“It was one more hit the industry certainly didn’t need.”
However, Bentley said once she had resigned herself to losing the PST exemption and the HST was initiated, she felt voters should have opted to keep the harmonized system.
“To go back and now administer two taxes seems a bit ridiculous in the sense that there are huge costs in administrating this,” she said. “Plus, the provincial government has to pay back $1.6 billion to the federal government for backing out of the deal and there is a huge cost again for setting up the administration. So, this is going to cost us money no matter how we cut it.
“In the long run it is a very shortsighted venture for voters who are angry with Gordon Campbell because he did not properly outline his intent. I understand it but to have this sort of backlash is not productive; it is not efficient; and it is going to cost jobs and money.”