Posted on 01 June 2011 by admin
OSOYOOS TIMES-June 1, 2011
By Karissa Gall – Osoyoos Times
The provincial government passed a binding motion in the B.C. Legislature on May 31 to reduce the rate of the harmonized sales tax to 10 per cent by July of 2014 should British Columbians vote no in an upcoming referendum to have the tax quashed.
As a result of the motion being passed, B.C.’s finance minister must advise the federal finance minister to cut B.C.’s portion of the HST to six per cent on July 1, 2012 and then to five per cent on July 1, 2014, should the “no” side win in the initiative vote.
“In every single income bracket, the average family comes out ahead and is a net beneficiary of having a 10-per-cent HST as opposed to a 12-per-cent PST plus GST,” B.C. Finance Minister Kevin Falcon told the Osoyoos Times. “Everything you purchase, whether it’s clothing, furniture, electronics, new or used vehicles, all are going to be at a 10 per-cent rate as opposed to 12.”
Falcon said an independent panel established by the government reviewed the HST and PST-plus-GST tax systems and in its final report, the panel estimated that B.C. families now pay an average of $350 more in sales tax under the HST than they paid with the PST-plus-GST system.
However, he said, using the same numbers the panel found that with a 10-per-cent HST, instead of paying $350 more tax, the average family will pay $120 less tax than with PST-plus-GST.
To help offset the costs of the HST before the rate reduction in 2012, one-time transition cheques of $175 per child would be issued to families with children under 18 years old.
In addition, low- and modest-income seniors would receive a one-time transition cheque of $175.
The cost of the transition cheques to the government is expected to be $200 million and they would be issued by the end of the year.
To finance the rate reduction and the one-time transition cheques, Falcon said the government will increase the general corporate income tax rate to 12 per cent from the current 10 per cent on Jan. 1, 2012.
That’s “an important day because that is the same day that the federal government will be reducing their general corporate tax rate by 1.5 percent, such that the net effect in British Columbia is a 0.5-per-cent increase,” Falcon said.
He added that the government will also “postpone” the reduction in the small business tax rate planned for April 1, 2012.
Although it may seem counterintuitive, Falcon said that the business community, virtually to a person, has lined up in support of the proposed changes.
“All of their costs that used to have what I call invisible PST on them, they now get those costs back through input tax credits,” he said. “All of those costs that used to be passed along to consumers in the form of higher prices, businesses now get those costs back and they can pass them back either in the form of lower prices or new investments for their businesses.
“Even with the general corporate tax increase of two per cent, we in B.C. – because of the work we’ve done lowering the rate over the last 10 years – have one of the lowest general corporate tax rates in the country.
“Finally, and perhaps most critically, a lower HST rate at 10 per cent puts $1.7 billion a year of additional purchasing power into the hands of consumers. You know for sure that much of that will be recycled back into small business, whether it’s restaurants or retail outlets or appliance shops.”
Despite the government’s proposed rate reduction changes to the HST, the tax is still the source of some dissonance throughout the province.
Perhaps the biggest proponents of extinguishing the HST – proposed changes or not – are the Fight HST leader and former B.C. premier Bill Vander Zalm and Fight HST lead organizer Chris Delaney, who are currently on the road in a government sponsored university debate tour with the Smart Tax Alliance.
Delaney told the Times that although the proposed changes to the HST “definitely reduce the burden,” Fight HST is still campaigning to quash the HST.
Delaney said that because the HST entails a broadened tax base, British Columbians will still be paying more under a 10-per-cent HST compared to the PST and GST tax system.
“The PST is seven percent; the HST – the provincial portion of the HST – will now be five percent, but the five percent of the HST provincial portion will be applied to hundreds more goods and services than PST is,” he said. “That’s where it costs more money.
“In order to get the HST down to where we pay the same amount of money in overall taxes that we did under PST they would have to cut it by four percentage points, not two. A two-percentage-point cut does not reduce the rate the same as PST.”
Delaney said that at the debates that have taken place as part of the university town hall tour, “crowds are about 80-per-cent in favour of getting rid of the HST.”
According to Falcon, the claims being made by Delaney and the Fight HST campaign that even a reduced HST rate will cost B.C. families more money are “simply not true.”
“Under the HST, 80 per cent of consumer spending remained unchanged, in other words it either had no tax or it was the same 12 per cent PST plus GST that we had before,” said Falcon. “On 20 per cent of consumer spending, there was now the additional seven percent GST that applies. So if you get a haircut or buy a coffee or fast food, then you will be paying an extra seven per cent. The analysis of HST impact on families at 10 per cent includes all of that and still you are further ahead, benefitting because of the lower rate on everything.
British Columbians will vote on the fate of the HST in a mail-in referendum.
Ballots will be mailed out this month and must be returned to Elections BC or a Service BC office by July 22.
The result of the referendum will be binding and should be known in August.
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