Premier David Eby has rejected the idea of British Columbia bringing back a harmonized sales tax, but B.C. business leaders and economists say it’s worth considering.
Greater Vancouver Board of Trade president Bridgitte Anderson raised the question with Eby last Friday during a conversation about his government’s latest budget. Eby said his government is not looking at introducing an HST, saying, “I don’t hear a lot of appetite for it.”
On Tuesday, Anderson was joined by several other B.C. business leaders and representatives from the mining, construction and other sectors in calling on the province not to proceed with plans to expand the provincial sales tax to certain professional services as of Oct. 1.
Anderson again raised the issue of exploring an HST, saying B.C.’s PST is among the least competitive in Canada. She said the HST is something that should be explored, if it is “palatable” to British Columbians.
Speaking with reporters Tuesday, Eby flatly rejected the notion of bringing back the HST, saying “the answer is no.”
“If there are things we can do to support business with reducing paperwork, bureaucracy, other things, that’s good news for them and good news for us. We’ll do that work any day of the week, but layering an additional level of tax on British Columbians right now is a non-starter,” he said.
The B.C. Liberals brought in a short-lived and controversial HST in 2010, merging the PST with the GST into a 12 per cent tax on the purchase of almost all goods and services. Public opposition to the move led to a 2011 referendum, in which close to 55 per cent of voters rejected the HST.
For businesses, a move to the HST would lower the tax burden and reduce paperwork. Critics of the previous HST regime argued it led to higher consumer prices for middle- and lower-income British Columbians.
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Economists say that despite its past unpopularity in B.C., a value-added tax like the HST is generally preferable to the PST.
Kevin Milligan, a professor of economics at the University of British Columbia and co-editor of the Canadian Tax Journal, said there’s a reason most other provinces and hundreds of countries use broader, value-added taxes.
“It’s a fairer tax because it doesn’t pick and choose what’s covered. It allows for better incentives for business investment, which we want to boost the economy here. It’s just an overall superior tax than the retail sales tax we have,” said Milligan.
Milligan said expanding the PST to professional services is generally a sensible move.
“There’s two ways to raise a certain amount of revenue. You can have a high rate on a few things, or a low rate on many things. And economists tend to think it’s better to have a low rate on many things. That’s why expanding the base of the PST or having a general goods and services tax is a better option,” he said.
Steeve Mongrain, a professor of economics at Simon Fraser University, said B.C.’s PST system is uncompetitive because many services have historically been exempt, making the tax narrower than sales taxes elsewhere in Canada.
“The idea of [a value-added tax] is really to tax, at every step of the way, the value that is produced by any of the members of a supply chain,” said Mongrain. “Also, the important thing is that it’s a very broad tax, so it will not distort the relative prices of certain goods versus others by taxing some and not taxing others.”
He said the government’s current approach of broadening the PST base approximates some of the benefits of the HST.
“It’s a kind of a political nightmare to try to revive the HST,” said Mongrain. “But if you ask most economists, they will say that, yes, HST is a far superior and efficient way to tax compared to the current PST.”
B.C. Conservative economic development critic Gavin Dew would not comment directly on the idea of bringing in the HST in a texted statement to Vista News, but said many businesses in B.C. were “blindsided” by the PST expansion. He said the move will increase costs for small businesses, as well as housing and industrial development.
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