BC’s coming HST

I’ve been giving some thought about the upcoming HST, which will harmonize the 5% federal GST with our existing 7% PST into a single 12% tax. From what I understand, this is a boon to capital-heavy large business, particularly in manufacturing – the savings there can be immense. So I understand the point of it if you’re a BC Liberal – the remnants of BC’s heavy industry & forestry are core supporters of the party. But it strikes me as a move that will serve to alienate virtually every other sector. As a small business owner, the only impact I see for my business is that all my services are about to get more expensive – until now, I’ve only had to charge GST to my clients, because I do not deliver a physical product. However, I believe I’ll now have to charge (and collect) HST – so suddenly everything I do costs my clients 7% more. Not ideal when many clients are working with us to find ways to deliver services more cheaply, or are scaling back project ambitions due to cost, etc. For Jeff, who in sales entertains clients (both current & prospective) a fair bit, our acquisition costs will rise, because restaurants will also charge HST on meals. So I’m not a huge fan of the tax itself.

I’ve also been thinking about the timing of the introduction of this tax, and I think it is brilliant political maneuvering by the Liberals, although I suspect they miscalculated the response. The NDP just lost an election by campaigning on “Axe the tax” – certainly, a different tax – but a tax all the same. And that campaign by the BC NDP backfired hugely, and lost them support of many organizations & supporters. So, one would think, their willingness to oppose a proposed tax would be lessened. The Liberals also just won an election and are riding high, with the next election years away. The first year in office is definitely the time to do anything unpopular – we’ll all have either forgotten or grown used to whatever change is being made. Finally, because we are in a recession, the Liberals can spin this as being “economic stimulus” in the grand tradition of right-wing trickle-down economics: help BC’s “core” industries, and let the wealth trickle down from there. Never mind that increasingly, BC’s core industry appears to be service-based, as the Georgia Straight pointed out.

2 Replies to “BC’s coming HST”

  1. I’ve been gnawing on this as well – in principle, as an economist, I think harmonized sales taxes are GREAT, we should have been doing it a long time ago – they are much more efficient and they don’t distort the marketplace by making some things cheaper than they should be and others more expensive (thus the gov’t’s point about being keeping the economy competitive.

    OTOH, keeping it at 12% feels like a tax grab especially as more things are taxed and the ones where there are savings are not obvious (it’s clear they do exist though and appear to be substantial for some). Knowing that gov’t got a 1.6 billion dollar “bribe” is also off-putting. At the same time this gov’t hasn’t been one to raise taxes – they’ve been cutting as long as they’ve been in power, if the tax is a tax grab then why is this gov’t doing it (other than the recent shortfall in revenue) – it doesn’t make a lot of sense.

    However, most economist agree that 12% is low for a sales tax (despite its regressive nature – fix it elsewhere in your tax model they say which I agree with). High consumption taxes promote savings they say (this is largely true).

    I’m not sure where I stand except that I won’t likely sign any of the petitions out there – especially the ones on FB.

  2. I’ve been gnawing on this as well – in principle, as an economist, I think harmonized sales taxes are GREAT, we should have been doing it a long time ago – they are much more efficient and they don’t distort the marketplace by making some things cheaper than they should be and others more expensive (thus the gov’t’s point about being keeping the economy competitive.

    OTOH, keeping it at 12% feels like a tax grab especially as more things are taxed and the ones where there are savings are not obvious (it’s clear they do exist though and appear to be substantial for some). Knowing that gov’t got a 1.6 billion dollar “bribe” is also off-putting. At the same time this gov’t hasn’t been one to raise taxes – they’ve been cutting as long as they’ve been in power, if the tax is a tax grab then why is this gov’t doing it (other than the recent shortfall in revenue) – it doesn’t make a lot of sense.

    However, most economist agree that 12% is low for a sales tax (despite its regressive nature – fix it elsewhere in your tax model they say which I agree with). High consumption taxes promote savings they say (this is largely true).

    I’m not sure where I stand except that I won’t likely sign any of the petitions out there – especially the ones on FB.

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