The provincial government has now committed to reduce the Harmonized Sales Tax (HST) to 10 per cent if British Columbians vote to keep the controversial tax.
The May 25 announcement came three weeks before the referendum begins on June 13, and states the total HST rate will be cut from its current 12 per cent in two stages over the next one to three years if voters accept the tax.
On July 1, 2012 the provincial portion would be cut by one per cent. A further one per cent reduction would take effect on July 1, 2014.
These changes will only go into effect if the majority of British Columbians vote to keep the HST, according to Finance Minister Kevin Falcon.
Cariboo-Chilcotin MLA Donna Barnett notes the old tax system was at 12 per cent when combining Provincial Sales Tax (PST) and Goods and Services Tax (GST), so at 10 per cent HST, there will be savings.
“A few things might cost more, but … a lot of things will cost less.”
With the revised HST proposal, the B.C. Liberal government has also promised one-time transition cheques of $175 a child issued to families with children under 18 years old, as well as to low- and modest-income seniors.
Barnett notes B.C. residents who currently receive HST rebates will continue to get those.
Anti-HST organizer Eric Freeston says he doesn’t trust the current government.
“They’re sitting there holding this offer for at least another year before they’re even reducing the HST rate.
It’s like vote buying. Why not just simply do it?”
The independent panel that reviewed the tax systems recently estimated families now pay an average of $350 more in sales tax under the HST than they paid with the previous system.
However, Freeston argues the B.C. Liberal appointed panel’s numbers are skewed.
“If you look at that report carefully, they identify a family as being a family of one person.
“If you take it [literally], that means for every individual, $350 is what the average cost is, not to a family.”
Barnett says she won’t comment on the report because she wasn’t part of it, but adds she has faith in the panel.
“The opposition is going to read things the way they read them. But, at the end of the day, the decision will be made by the public.”
The panel’s report also indicates that with a 10 per cent HST rate, B.C. families will pay $120 less tax on average than they did before the HST was implemented.
Premier Christy Clark’s government also proposes to increase the general corporate income tax rate to 12 per cent from the current 10 per cent on Jan. 1, 2012, and delay eliminating the small business tax rate that was to take place next year.
“If the federal government follows through with its [corporate tax cut] commitment, it will just about balance itself out,” notes Barnett. “There may be an 0.5 per cent difference, but it will be pretty close.”
If the federal tax cuts don’t happen, then the corporations will be left with the increase, she adds.
B.C. Federation of Labour president Jim Sinclair says the HST makeover scheme puts about $1.7 billion annually in the pockets of big business.
“If we kill the HST, keep the PST and get corporations to pay their fair share of taxes, families will pay less and the government will have more money to spend on seniors and children.”
Barnett says she thinks the people will be satisfied with the changes to the HST.
“When they did these town-hall meetings, the consensus was ‘if you get it down to 10 per cent, we’ll be happy with it’.”
The Canadian Taxpayers Federation (CTF) also applauded the B.C. government’s proposal for the staged reduction in HST.
CTF BC director Gregory Thomas says with a five per cent provincial HST rate, the referendum becomes a “no-brainer.”
“Voters should vote ‘no’ to reinstating to the provincial sales tax of 1949. The old PST is a job-killing relic that belongs in the history books.”
If the referendum passes, tobacco taxes will be increased in line with the HST rate reductions, to keep total taxes on tobacco the same.
This element of the proposal was announced at a recent finance ministry’s media lockup, and Barnett says she has not yet heard about it.