John Winter: HST is key to a strong economy in B.C.
By John Winter
The reasons to support the HST may not inspire rallies, but the ramifications of this policy change will affect the entire economy and, over the long-term, benefit every region of the province.
When the B.C. government announced last summer that it would implement an HST, the business community was quick to support this important policy decision. Over the ensuing months, that support has not waned, because the facts have not changed. Simply put, the HST is crucial to B.C.’s long-term economic prosperity.
Noted economist Jack Mintz estimates that, by 2020, 113,000 new jobs will be created as a result of this tax change. Adopting the HST will generate $11.5 billion in capital investment in B.C. over the coming decade, and make B.C. businesses more competitive. Experience in Atlantic Canada and other jurisdictions confirms that shifting to a value-added sales tax like the HST paves the way for increased capital spending on machinery, equipment, structures, new technologies, and other productive assets.
How does the HST encourage jobs and investment? By removing $2 billion in PST-related costs from business inputs, the vast majority of businesses in the province will be in a better position to invest, to grow, and to sustain and create jobs. Consider forestry and mining, which are cornerstone industries that drive the wealth of our economy. For those communities across the province which rely on these industries as a major employer, this could be the difference between additional shifts or additional lay-offs.
The forestry industry, which alone contributes $17 billion to the province’s GDP and employs 80,000 people, is experiencing its most severe economic downturn and financial crisis on record. The HST could save the forestry industry $140 million annually, and will likely prove to be the most critical tax-policy change the government could introduce to assist in recovery in the short term and to ensure the forestry industry remains competitive in the long term. After three successive years of record losses, additional tax savings would be a welcome relief.
Despite the clear long-term benefits of the HST, many consumers are asking why they should bear the burden of increased costs in the short term. The fact is, consumers are already paying the business portion of the PST, as those costs are passed on and hidden in the final price that is rung up at the till. With an HST, businesses receive tax credits for inputs, just as they do already under the GST, which decreases the cost of producing goods. In a competitive market this should lead to decreased prices on many items. This is not a theory; we know this is what happened in the Atlantic provinces once they moved to an HST.
And it’s not just larger businesses that will benefit from this tax change. Under the present system of separate provincial and federal sales taxes, businesses are forced to deal with two different sets of tax rules, administrative authorities, and compliance requirements. In consultations with government, small businesses across the province have consistently made the case for a simplified and streamlined provincial tax system that maintains a competitive tax structure. Switching to the HST will achieve both these objectives, and tax filing, compliance, and other regulatory costs will be significantly lower once the HST is in place.
On the national scene, when Ontario implements the HST it joins Quebec and three Atlantic Canadian provinces—and roughly 70 percent of the Canadian economy will have a harmonized tax. More than 130 countries, including 29 of 30 OECD countries, have adopted similar tax policies. The HST will put B.C. on a more even tax footing within Canada and ensure that needed investment dollars and jobs aren’t lost to other jurisdictions at home and abroad.
The problem is that no tax change goes smoothly for everyone in the system, and there’s no question some industry sectors will face more challenges than others as the HST is implemented. There is no easy time to make a change, especially one as significant as this. But there is no better time to make it. Harmonization makes our province more competitive, and will generate positive economic results for businesses, consumers, and workers in British Columbia in the years ahead.
John Winter is the president and CEO of the British Columbia Chamber of Commerce.
Comments
45 Comments
Duf
Jun 8, 2010 at 2:18pm
All business have PST tax exemption numbers, they do not pay PST on items for resale.
HST is a tax shift from business to people. It is a consumption tax that hurts the most vulnerable in the Province. We already have the highest child poverty rate in Canada, this will only make the matters worse.
Business if going to find out shortly that they have picked the pockets of the consumer so much, that after housing and food, we have nothing left to purchase their goods.
They pay the lowest min. wage possible. Now they want to shift the cost of doing business onto the back of the consumer.
Time for the "business community" to see the real picture, the consumer is now tapped out, what with income tax, carbon tax, transit tax, federal tax, GST, PST, property tax, levies, user fees, MSP premiums, now a 2 billion dollar tax shift to consumers by business.
Enough already!
Your business won't survive if consumers have no discretionary spending money left!
We, the consumer are tapped out!
RodSmelser
Jun 8, 2010 at 2:34pm
From the article:
"By removing $2 billion in PST-related costs from business inputs, the vast majority of businesses in the province will be in a better position to invest, to grow, and to sustain and create jobs."
"The fact is, consumers are already paying the business portion of the PST, as those costs are passed on and hidden in the final price that is rung up at the till."
=======================================
Well, which is it?
Are businesses bearing the tax burden on their input costs in terms of reduced profits? Or are they passing those costs on to consumers?
Rod Smelser
CoCo
Jun 8, 2010 at 3:05pm
I love how the Crooked Liberals and Campbell say HST will be good for the economy. Min wage has not gone up since Gordo has come to power, the cost of living goes up taxes and everything else. The latest cash grab was the "carbon tax". Seems the hedge fund wasn't enough to balance the books for government miss-spending.
When are these Con Artists going to be held accountable for their actions. HST will NOT create more jobs! Who are they kidding. The big businesses get richer the working class get poorer. Gordo and his hench men have nothing left to sell to the americans to make a buck. May as well screw the people of BC again.
The underground economy will flourish. If i can save a buck not paying HST i will. I'm tired of having my pockets robbed!
Enough is enough, Gordo and his goons have to go. I'm tired of big businesses getting the breaks, while normal working folks get screwed once again! Oh wait we will see lower prices once the HST is in, blow some more smoke up my arse. You already stink!
Bruce McAra
Jun 8, 2010 at 3:35pm
How is Encana going to pass along the savings of drilling a gas well around Fort St. John? Gas prices are not set by producers they are set by exchanges and contracts. How is Goldcorp going to pass along savings from expanding a mine or upgrading its equipment? Consumers don't buy raw minerals.
Companies like these - large, capital intensive operations will receive by far the biggest share of input credits. They don't control prices so they can't pass along savings and even if they could the customers of these companies are not for the most part in BC.
Of course business wins with HST but consumers lose. If business could simply pass along the cost of taxes they would not care whether the HST or PST was in place - it would make no difference.
Please try to tell the truth Mr. Winter.
Camero409
Jun 8, 2010 at 4:19pm
The HST is such a blatent tax grab by the elite it is almost laughable except that it hurts so many people. Raise the minimum wage, allow unions to negotiate fair contracts, stop robbing the middle class and the poor to fund bonuses and huge shareholder dividends, just to mention a few things. When and if that ever happens then and only then we can talk.
Recind the HST and put more money into education, make our health plan more streamlined instead a business. I could mention many more changes but enough said. Stop these crooks now. Vote them out! Bring on the recall!
Going to aus
Jun 8, 2010 at 4:31pm
Well lets see how HST, Carbon Tax, Increased Medical, Increased Tuition affects those who are just starting out in life. Hmm...This really hits those on the lower end of the wage scale, and the young. For Example, I make 20/hr, Wife is 15/hr so
35 X 40 X 52 = 72, 800/yr = 6066/month - Taxes and whatnot i would be at about 4000/month income. so from that lets take 35 % for housing/mortgage = $1400 to spend. I have about 70,000 as downpayment, on a 25 yr mortgage at %4.9
I can afford a 310,000 dollar place. So forget a house, thats impossible, unless your in whalley. I ask myself if it is worth it, and the answer is no. I encourage all young people to leave this city, stop going to restaurants, try your hardest to not spend a dime here. Its time our parents generation reallizes they cant keep screwing us anymore. And now the baby boomers are all retiring, and we are suppose to work even harder, spend less time with our familys, have less vacation, and less time to spend with our kids. Personaly, I hope the baby boomers get screwed by our generation big time. They have screwed us, by destroying our environment, screwing the economy, and by using up the planets resources like pigs. I think its time for a revolution
glen p robbins
Jun 8, 2010 at 4:41pm
The point here is that business doesn't have the credibility to sell the HST-after bleeding off taxpayers during the recession//none of the experts properly predicting this-people don't care if the HST turns water into wine -they don't care what business thinks- I don't know how this minority of HST supporters including Mr. Winter do not understand this.
Birdy
Jun 8, 2010 at 5:02pm
"Noted economist Jack Mintz..."
Now is this the same Jack Mintz that writes papers for the IMF about global income tax? Oh it is...
Yeah, I really trust that guy.
You guys are really starting to suck at hiding your agenda.
Ed Chateau
Jun 8, 2010 at 5:27pm
It never ceases to amaze me how the HST boosters ignore the impact on the service sector which employ 79% of people in this province. The fact of the matter is that any company that uses human capital and knowledge as its primary input is a loser under the HST.
BC could very well end up being a net-job loser under the HST currently formulated.
For example, if a research firm is going to hire a Ph D. you don't get an HST tax credit for her/his salary. Instead, you have to pay a higher wage because of higher expenses to live in BC. However, you must charge your customers HST, but if you were based in Calgary you would not. There is nothing pro competitive about that equation.
The HST as implemented is unfair. Consumers and knowledge based firms get hit, while some capital-intensive industries will be better off.
The provincial government should have known better than to rush into such lop-sided policy that benefits a minority at the expense of the majority.
Raif
Jun 8, 2010 at 7:27pm
Why is it that taxpayers always have to subsidize small and big business to finance the economy. We have an articiialyy manipulated dollar exchange that cost us 5-10% on everything we buy. And now we have HST which throws all goods and services into the sales tax collection mode. That is roughly a 17% increase on the things we will be taxed on as opposed the the previous tax regimine where some items were exempt. The Canadian Chamber of Commmerce is nothing but a lobby group that manipulates politicians. If you want to see for yourself checkout the next time an electected official comes to town, he'll most likely will be speaking to the Chamber in facilty arranged by themselves. Nothing for the working man as we are only here to pay the bill business wishes to avoid..