British Columbia

HST has divided B.C. business community

Posted: September 02, 2010

The group representing B.C. restaurant owners says the province's handling of the HST has divided the business community and damaged its relationship with the government.

Ian Tostenson, the president of the B.C. Restaurant and Foodservices Association, said he wasn't surprised to learn bureaucrats were studying the HST before the election. But before bringing in the tax, the government should have consulted more with businesses, he said.

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"I think it's caused some trust issues, some short-term trust issues," Tostenson said.

Before the May 2009 election, the Liberals told the restaurant association they had no plans to start HST discussions with Ottawa.

During the campaign, the Liberal Party was asked in a questionnaire from the association: "Will your party oppose harmonizing GST with PST in British Columbia?"

In its official response, the party said, "a harmonized GST is not something that is contemplated in the B.C. Liberal platform, but we are committed to improving the tax system."

But according to documents obtained through a Freedom of Information Act request, high-ranking bureaucrats in B.C. and Ottawa were discussing the HST before the last election and had prepared briefing notes on the tax for the finance minister.

Finance Minister Colin Hanson maintains the documents support his long-standing claim that even though senior bureaucrats were talking with their counterparts in the federal government about the tax, the Liberal government did not decide to adopt it until Ottawa offered a more flexible arrangement after the provincial election.

HST raised restaurant taxes

Tostenson says he's also upset because his concerns about the economic impact of the tax were supported by the government's own analysis, despite frequent statements by Hansen and Premier Gordon Campbell that the tax would be good for business and the economy. 

The association says the tax is bad for restaurants because customers now have to pay more for food in restaurants. Prior to the introduction of the 12 per cent HST in July, 2010, customers only had to pay the five per cent GST, and not the seven per cent PST.

Other small businesses such as hairdressers and professional consultants have also complained the tax will affect their bottom line, because they were not subject to the old PST. Larger businesses that depend on exports, such as B.C.'s lumber and mining industries, have applauded the rebates the new tax will give them.

"We were trying to make this presentation as to what we think the damage would be to our sector, and we were getting, 'No, it should be fine. The HST is going to be good,'" he said.

In one of the studies contained in the released documents, finance officials indicated the HST could hurt the province's employment rate and GDP and predicted it could take five years or more to see benefits from the HST.

"The hard thing for me to understand is they had an economist that wrote at the beginning of all this and said, 'We think there could be five years before we see any benefits,'" Tostenson said.

Tostenson said the HST has divided the business community, and he believes the premier should meet with business owners to work through their differences.

Despite the controversy, he said, he believes the HST could be good for the province in the long term.