By Jane Sterk, Heather Drugge, and Julius Bloomfield
The B.C. Liberal government’s decision to implement the harmonized sales tax has caused outrage in the population generally (85 percent were opposed in an Ipsos Reid poll) and from some businesses that will be negatively affected by the change. Like others, the Green Party of B.C. believes that the Liberals would have been advised to discuss the possibility of harmonizing the two sales taxes during the election.
Greens believe that the HST will be implemented despite public opposition—the B.C. Liberals need the money the federal government is offering to reduce the deficit. Given that, Greens would like to see the provincial government maintain some of the current PST exemptions and, in fact, lobby the federal government to remove the GST from these items to provide additional savings for consumers. Greens support the exemptions on sales of bicycles, electric vehicles, energy-efficient windows and appliances, building material used for energy cost reductions, heat pumps, solar power, other energy efficient devices, and used clothing.
In both 2005 and 2009, B.C. Greens’ platforms supported combining GST and PST collection. The Green Party of B.C. adopted this policy as a result of consultations with small-business organizations that said a harmonized tax would help reduce costs and simplify doing business. Reducing red tape for business is a common method for government to stimulate the economy, and simplifying taxation systems represents a step in the right direction.
The offer of $1.6 billion from the federal government to switch to the HST came at a time when the B.C. Liberals’ February budget was about to be shown to be unrealistic with regard to the deficit. $1.6 billion will go a long way to disguise the real state of the B.C. economy. When the budget was released in February, B.C. Greens predicted that the deficit would be much closer to $1.5 billion than the $500 million the government said it would be.
What are the pros and cons of a harmonized sales tax?
Pros: Clearly anything that simplifies the taxation structure could be a net benefit to taxpayers and business. The federal government has agreed to collect and process the HST and transfer the provincial portion to the province. This will mean annual operational savings of $28 million as the provincial tax collection service is eliminated and the staff of 400 is transferred to the federal government.
For businesses that currently charge GST and PST, the HST should make business less costly. For other small businesses, it might prove beneficial if they pay a lot of PST that they cannot recover under the present system and they can claim back the full HST amount as income tax credits like they do now on GST. If businesses pass on these savings, consumers could see reduced prices.
Cons: Some things that were previously exempt provincially will now be taxed. We’ve seen particular concern expressed by businesses in tourism (although the hotel tax rate of 10 percent will be reduced to seven percent), food services, and new home construction.
The Green party believes that taxes should be used to change patterns of consumption by increasing tax on things we don’t want, like pollution, and lowering taxes on things we do want, like energy retrofits of buildings and houses and by getting people to switch from driving to biking or transit. Looking at the existing PST exemptions is informative. While we support the items listed above, there are some exemptions, like bottled water and non-alcoholic beverages, that Greens would discontinue. Under HST, new homes costing over $400,000 will pay an additional seven percent on the amount over $400,000. Greens are concerned about adding new costs to housing.
Greens want a guarantee that low-income British Columbians will not be unduly penalized by the move to HST. The B.C. government is proposing to provide quarterly rebates of $230 to individuals whose income is $20,000 or less and to each member of a family whose annual income is less than $25,000. These income levels fall in the “low income cut-off”, as calculated by Statistics Canada, so lower-income individuals and families appear to be protected, although we would like assurance that $230 is sufficient. We also support the continued exemptions for basic food, books, and children’s clothing.
Finally, B.C. Greens believe we must move to regional self-sufficient economies as one strategy to adapt to climate change. Increasing local food supplies will be critical to that transition. We would like to see some means using the tax system to increase the amount of land in local food production and to provide B.C. farmers with a competitive advantage over imported food. The HST does not appear to be an appropriate vehicle for this shift, but how we get back to growing the bulk of our own food is an issue of some urgency.
Jane Sterk is the leader of the Green Party of B.C., Heather Drugge is the party’s policy chair, and Julius Bloomfield is its regional representative for the Okanagan.