B.C. budget proposes tax revisions even as recent HST failure lingers

The B.C. government has launched a commission to examine how competitive B.C.’s tax regime is but vows to avoid the HST pitfalls.

Harmonized sales tax called 'political kryptonite'

Demonstrators opposed to the harmonization of the PST and GST hold signs while awaiting the arrival of British Columbia Lt.-Gov. Steven Point to deliver the throne speech in Victoria on Aug. 25, 2009. (Darryl Dyck/Canadian Press)

It was the tax so reviled B.C. Liberal politicians still dare not speak its name.

The HST, or harmonized sales tax, was so unpopular it was dumped in 2013, after a public outcry triggered a referendum that saw 55 per cent of British Columbians voting against it.

It's clear even three years later the acronym is so toxic that when Finance Minister Mike de Jong announced plans to hire someone to oversee a commission of tax competitiveness he wouldn't even say it.

"For those who are looking to dust off their placards you will notice that the terms of reference specifically excludes one option and I still haven't been able myself to repeat those three letters," joked de Jong.

The majority of British Columbians opposed the HST when it was last introduced.

At the time, however, the HST was no joking matter for the Liberals. The implementation of the tax derailed the Gordon Campbell government, led to protests on the lawn of the legislature and beyond and then a petition that forced the vote that eventually scrapped the whole thing.

So now de Jong faces the daunting challenge of overhauling an archaic PST while avoiding the pitfalls of the HST process.

"What we are trying to address in a more general way is the competitiveness of our taxation system. We have a PST, a tax that was created and implemented in 1948. We have it, but to what degree should it be evolved and adjusted to take into account a changed economy?" said de Jong.

Sudden change prompted criticism

Even the mention of a change to taxation makes some in the province weary. Bill Tieleman, one of the leaders of the group Fight HST, says the province would be foolish to attempt anything that could be compared to harmonizing the PST and GST.

"Mike de Jong made it quite clear the word HST is radioactive, it is kryptonite and the government doesn't want to go anywhere near it, which is a good thing," says Tieleman. "When we were fighting the HST we said let's figure out ways to make things more competitive."

Former B.C. Premier Bill Vander Zalm (left) and rally organizer Bill Tieleman listen to the concerns of a man at an anti-HST rally in downtown Vancouver on Sept. 19, 2009.

Where the government went so wrong in implementing the HST was in large part because the change came as a total surprise to British Columbians. Then-premier Campbell had assured voters in the 2009 election the blended tax wasn't coming and then suddenly it arrived.

The harmonized sales tax also shifted $2 billion in taxes off business and onto consumers. Finally, the province failed to hold meaningful public consultations as to how the tax was going to work so that even many of the businesses that benefited the most were not brought into the decision-making process.   

"If you are going to shift taxes you need to talk to people, you need to explain what you are going to do," says Tieleman.

Businesses call for change

Business leaders are not being as cautious as Tieleman when it comes to changing the tax.

The Vancouver Board of Trade called for changes to the PST before and after the province's HST debacle, in part because many businesses are forced to pay the seven per cent provincial tax on most of their input, putting them at a disadvantage compared to businesses in other jurisdictions not forced to pay similar taxation.

"It is the one part of our taxation system that is driving down the attraction of this region as an attractive place to create jobs," says board of trade chair Iain Black.

55 per cent of British Columbians voted against the HST in 2013. ((CBC))

Black says one of the challenges with the HST was it tried "to achieve everything." Now Black is hoping the government focuses instead on making changes that will benefit both businesses and the economy.

"There are some elements that can be borrowed from the HST and I hope that they are," said Black. "Like businesses being able to deduct the cost of heavy equipment in a more attractive way. That makes investing in those type of heavy industries and thus creating employment a much easier thing to do."

It is now a fine balance for de Jong to be able to make the changes he believes are necessary and create something that not just business can buy into, all while avoiding that dreaded three letter word.


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