Friday, August 26th, 2011

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British Columbia Defeats HST

Image via Wikipedia

I just got the word that the Harmonized Sales Tax has been voted down in the recent referendum. This is a major victory for participatory democracy and BC is the only Canadian province not taking part in the HST.

Here’s a quick overview of our tax structure for non-Canadians.

Canada jumped on the VAT (value added tax) bandwagon in 1991 when the federal government imposed the GST (goods and services tax). Each province and territory also has its own sales tax. The two taxes are additive. Each component is between 5 and 7 percent, so you could generally figure that the actual cash you would need to shell out for a purchase is going to be 12% more than the sticker price.

Keeping track of what was taxable and what wasn’t could get to be quite challenging. Some things were exempt altogether, some were liable for GST but not provincial sales tax, etc. It was also fairly complicated to figure out how much of the tax pie went to Ottawa and how much was returned to the provinces.

The harmonized sales tax was supposed to clear up all the confusion and make things simpler for businesses. Replace the two taxes with a single tax that was the same all across the country. Seems like a really good idea, right?

Not exactly. Wherever it has been brought in, the HST has been like a wet blanket thrown over the economy. Peoples’ experience of the new tax was that it was a massive cash grab. The problem that affected taxpayers wasn’t the rate of taxation, which stayed pretty much the same, but that suddenly a lot of things that were tax-exempt under the old system were now taxable. Childrens clothing was one exemption that people valued and that was now wiped away. Labor costs also owed taxes now. One place this showed up is that a senior who had a care-worker or housekeeper coming in saw the cost of that service increase by 12% because their care-worker now owed HST.

Still, that’s the way things were under the new tax and there was nothing to be done about it.

Except in BC.

BC was one of the late adopters of the HST. Other provinces had signed on much earlier and tax-payer sentiment across the country was very much against the tax. British Columbia had a majority liberal government that wanted the new tax, so they simply rammed it through. The thing that made it possible to defeat the tax and that removed the premier, Gordon Campbell, from power, is that they didn’t debate the issue in the house. That’s a no-no according to Canadian parliamentary procedure.

Why they didn’t allow debate will probably never be known. They had a clear majority in the house, so they could have allowed the opposition to yap for a couple of hours and then voted the tax in. But they didn’t.

The liberal government almost fell because of this. I think it should have. The result of this oversight was a gaping chink in the liberal armor. Everybody who was politically savvy and opposed to the liberals sprang into action. A series of recall campaigns was launched against liberal members who had voted in favor of the HST. Some actually succeeded.

Gordon Campbell was obviously toast. He left to become Canadian High Commissioner to the United Kingdom. Way to land on your feet, Gordo! So the liberals had a new leader, Christy Clark. One of the first things she did was allow a referendum on whether we should stay with the HST or go back to the old tax structure. The results came in today. Back to the old by a margin of 10%.

Like I said, this was a victory. The government spent a lot of money and pumped out a lot of smoke about the HST and it still went down in flames.

Will it make any difference in the long run? Probably not. I’m sure we’ll see the structure of the provincial sales tax evolve over the next couple of years so that the effect will be the same as if we still had the HST. Once governments get the smell of money in their nostrils they can always rewrite the laws to get it. So, no, probably no difference.

But the people actually got to give the government a kick in the ass in a direct way. That doesn’t happen very often. A much-hated leader is gone from the scene and the liberal party is treading much more carefully now. This is all great stuff. I’m really happy that there were a lot of people in this province who were not as cynical and lackadaisical as I am, or this would never have come about.

So hats off guys! BC is now the envy of the country for more than our scenery and our seafood. Go have some beer and pretzels. Thank you.

Category: Daily Rant