BC is several thousand kilometers and three time zones away, so much of what happens there passes below my personal radar. But the HST file is something I've tried to pay attention to, and the news from BC just seems to go from bad to worse. I have a couple of questions, and I'm hoping that someone who knows something about BC politics can fill me in:
- What is Gordon Campbell thinking? There is a strong – compelling, even – case to be made for the HST. Why didn't he try to make it before introducing the legislation? What hasn't he tried to make it since introducing the legislation?
- What is the BC NDP thinking? Why is it positioning itself as the anti-tax party? For that matter, why is the federal NDP offering its support for this position?
- Why is anyone paying attention to Bill Vander Zalm?
Worthwhile Canadian Initiative 
Who knows what Campbell is thinking? There is no argument to be made for lying. Campbell and the Libs promised, in writing, before the election to not institute the HST. Said the same thing for 8 years. They said it was a regressive tax that would hurt our economy and 3 days after the election were in talks with the Feds. This battle is not about whether or not the HST is a good tax. It’s about lies and liars.
The BC NDP is not positioning themselves as the anti-tax party. They are positioning themselves as “this” anti-tax.
Bill Vander Zalm is the only one who had the balls to step up to the plate as leader. All he is saying is what everyone is thinking.
You have to remember that the Libs have a history of lying. Their first term, they promised not to rip up our Hospital Employees contract, and then did. The second term, they promised not to sell BC Rail, and then did. This term, they said they were not contemplating instituting the HST, and then did. They went too far this time. British Columbians are pretty laid back, but if you push them too far, they push back. This is what is happening here now.
Stephen, was it you or Nick who answered this a while ago when you recommended a coherent, logical and coordinated economic policy for the NDP. The response of the NDP to any sort of HST is “But consumption taxes are regressive!!!”
There is no arguing with them.
1) Is that a rhetorical question?
2) The NDP are being opportunistic.
3) I wish that was a rhetorical question.
Determinant: That was Stephen, not me. I don’t know what Stephen’s chances are of the NDP listening to him, but they must be greater than mine!
Fair enough.
As a resident of Ontario I for one look forward to receiving a full HST credit on July 1 which will now include the “PST” portion for the first time.
Interestingly enough when were were chewing the fat before a church meeting a few weeks ago, one person asked what the fuss about the HST was. I explained that it’s a VAT and businesses get refunds for their purchases. The consumer pays for, but the consumer pays for everything (he agreed). I said that VAT’s don’t cascade and have proved resistant to evasion, whereas the old Manufacturer’s Sales Tax was leakier than a sieve.
I said most countries have a VAT and it combined with income tax is what has proved to be effective for paying for the stuff we want like health care. He did recognize that narrow taxes are generally evaded, the old problem with excises and duties and whatnot.
It seems to me once you explain that HST a more efficient tax and will help pay for the stuff we want (and we get more refund cheques), people will see the logic in it.
Part of the answer is Elections BC. They ruled the government couldn’t spend any money on advertising / communication about the HST during the petition period that is still going on.
“Mr. Hansen suffered a huge setback when Elections BC ruled that a pro-HST mail-out the government was planning to send to all British Columbians in May contravened provincial regulations. The electoral body said the pamphlet was an attempt to influence the outcome of a petition – which it was.”
Read more from Gary Mason here.
The BC NDP is not positioning themselves as the anti-tax party. They are positioning themselves as “this” anti-tax.
Last prov. election, the Carole James led NDP also ran against Campbell’s carbon tax with some success. So, it’s not surprising politically that he didn’t give them more ammo by revealing his HST plans at that time. And that she would lead a similar strategy now.
NDP hopeless though Paul Dewar seems not too bad as long as he sticks to foreign affairs.
There is no reason to talk Bill Vander Zalm in fact the only use ever found for him was to explain things to Don Getty behind closed doors at fed/prov meetings.
f your financial adviser told you that he had this great investment. If you invested $2,000 annually for a decade, you would get back $15,000 at the end. Would you jump at this investment?
I know that I sure wouldn’t be giving my hard earned dollars to this financial adviser, and would probably question their ability to do their job. Who in their right mind would think that investing $20,000 over 10 years to only get back $15,000 is a good investment?
Add six zeros to this scenario, and that is exactly the investment that the Premier and our local MLAs are trying to sell you with the HST. That’s right, the HST will end up reducing the provinces economy by half a billion dollars a year. So much for making BC Stronger. Lets take a look at the numbers.
The Ministry of Finance estimates that the HST will reduce taxes on business inputs by just under $2 Billion. However the HST will be revenue neutral, meaning that government revenues will not be reduced. If business is saving close to $2 Billion and government revenue is staying the same, who is picking up the difference?
The answer is simple, you. The HST is a Value Added Tax (VAT). The purpose of VATs is to put the tax burden on the end user, usually consumers. Now people like you and I, we only have so much money. Therefore the extra money we spend on the HST will no longer be available for us to spend. Basically , every dollar paid by consumers in HST will not be spent on consumption. Collectively this adds up to nearly $20 Billion less over 10 years. According to the Mintz report, commission by the BC Ministry of Finance, we can optimistically expect around $15 Billion in new investment and income from new jobs created by the HST. This leaves a hole in the province’s economy of $5 Billion over the next decade, or $0.5 Billion every year. How is reducing the BC’s GDP considered good economic management?
Now lets look at the track record of VATs in Canada. I am going to look at the implementation of the GST because the often cited example of the Maritime provinces included a reduction in overall taxes. While the GST was suppose to be revenue neutral, those words again, for the federal government. This tax shift has more in common with the current situation in BC then the others. The GST was implemented on January 1, 1991. The best manner for seeing the effect of the shift in taxes to consumers is through disposable income statistics. According to BC Stats, disposable income for all Canadians in 1991 immediately dropped 3.4 %. From 1992 until 1997, disposable income dropped a further 5.8% and started to recover in 1998 with a 0.1% increase. It took 7 years and nearly a 10% drop in your spending money to recover from the GST. I would hazard a guess that we can expect the same from the HST.
The Gary Mason article that Determinant referenced is very good. It should be noted that the reason Elections BC can muzzle the Liberals is that they, as the government, chose not to register as opponents to the petition. I guess they thought it would lend it legitimacy. Another brilliant political strategy by Campbell and Hansen!
I’m a computer engineer working for a high tech start up. In my office, some people are genuinely incensed that haircuts will cost a bit more but the majority are mostly offended at the Liberals’ obvious lies. Hansen tries to dance around this by saying that the “promise” that the government wouldn’t implement the HST was written by party staffers (in response to direct questionnaires) and not the candidates but that just makes him look even less credible. The fact that he clearly hid the looming deficit number also makes him look like a fool. (All of the Liberal MLAs are being kept busy writing letters to little municipal newspapers defending this. They make for hilarious reading.)
Perhaps I’m a simpleton but my imagination of the cabinet discussion immediately after the election is something like this:
Hansen: Finance just told me that our budget deficit for the year is going to be way bigger then we claimed all election. About $2 billion. That must have been what all those voice mails I ignored all campaign were about.
Campbell: I hate deficits! Only the evil NDP runs deficits! We must do everything possible to avoid one. Find me $2 billion!
Hansen: The feds will give us a $2 billion bribe to switch to the HST.
Campbell: Sign us up. By the way, Colin, take point on this so I can spend the next year appearing at every vaguely Olympic event I can find. I’m sure that if I wear red mittens long enough my personal popularity will skyrocket!
Chad: Let’s say I’m a business thinking of setting up shop in Canada. I can either go to a province that will tax the parts and raw materials that I buy to put my stuff together or I can go to one that won’t. Your quality of life won’t go up if there are no private sector jobs being created. Also, your income statistics have more to do with the overall economic climate after a particularily nasty recession in the early 1990s. The GST had little to do with it, and by 2000 income taxes at botth he provincial and federal level went down across the board.
And I don’t even know what to say about your comment on the HST removing $2B from the economy. You think it won’t be there just because businesses won’t be taxed by that much anymore? Do you think they’re just going to stash it away like Scrooge McDuck and swim around in it? You don’t think they’re going to try and invest to try to be more successful?
Seriously, look at how Sweden pays for its social spending without tanking its economy. It involves efficient consumption taxes. You’re just pissed because you’re being asked to pay for your own services instead of milking businesses, which makes them vote with their feet. The HST sucks, but unemployment does more.
About “BC Politic” … please don’t be fooled.
The BC Rail Political Corruption Trial — now underway — has implications for all of Canada, especially the Liberal Party (federal as well as B.C.) and the Prime Minister’s office. Remarkable, isn’t it? how it’s been kept so quiet for the past 7 years.
Wouldn’t you think that charges of high level corruption within government would be newsworthy? Perhaps some day Gary Mason will write about how Canada’s 3rd largest railway could slide from public ownership into private pockets in a deal that’s still partially secret.
[Oh. And a correction about dates. Gordon Campbell was first elected (2001) after vowing he would NEVER sell BC Rail, but testimony at the BCSupreme Court trial now in progress has shown that his plans were already made, and the buyer selected, by the time he made this ferocious lie. The trial centres upon the lyin’, cheatin’ bidding process. Go figure.]
Tax zombie says, “I hate taxes” Everyone runs away from tax zombie. Next time you see an undead, drooling, hungry creature coming your way, do you plan to chat it up with taxation theory – or run? Any more questions?
Gordon Campbell may not understand the valid case for the HST. Or he thinks the population can’t understand it (likely true).
Political parties want to win elections. Good policy or bad, if it’s popular the smart politician will jump on it.
Who?
The discussion taking place now is the discussion that should have taken place during the election campaign, or at least, immediately after when the HST first came up. People need to understand that lots of British Columbians signing the petition are saying, “I don’t know if the HST is a good tax, or a bad tax, but I really, really hate being lied to.” The BC Lieberals have dug themselves this hole and leapt into it up to their necks because of their lies, plain and simple. In their arrogance, after getting away with their previous lies, they thought they would push the envelope and try to get away with this one. Unfortunately for them, it ain’t working this time.
The problem with selling the HST to the people is that as soon as they hear the words “tax” and “increase” in the same sentence, they stop listening to the case for the tax. Everyone seems to forget that the Liberals have reduced our income taxes since 2001, so that we have the lowest income taxes in the country up to approximately $110,000 of income (Alberta than takes the title). The implementation of the carbon tax, and now the HST is a shift towards consumption taxes, which it seems most frequent readers of this blog understand to be a better model of taxation; however, the general public only understands that if their haircut costs more, who cares if there’s a chance for increased capital investment or employment, the tax must be bad.
Tax zombie! Awesome.
I’ve ceased looking for a rationale behind the stop the HST thing. You go to VanderZalm’s site, for example, and there’s lots of info about rallies and such, but no position, no reasons, no ‘top 10 things to hate about the HST’, nothing that points to WHY you should go to the rallies to stop the HST. I guess you don’t need reasons, the tax IS the reason. Uhhh tax bad! Me hate tax!
But it has been woefully unsold by the govt. Very little information on what it covered, what changes, and why introduce it has been forthcoming. Businesses have been marketing “buy now before the HST!” — and I really don’t know if the tax hit on the product or service would be any different… and it’s due to be implemented in a couple of weeks. It’s bizarre.
Funny reading this thread….so many comments are exact echoes of the national debate over the GST in 1989-90. I remember getting a haircut in late 1989 and the barber practically frothing at the mouth over the GST applying to haircuts.
Exactly!
And yet somehow, life went on.
What scares me is: the whole country can be raddled with corruption, and huge public assets like BC Rail, or BC Hydro, or BC Ferries, the forests, the rivers, whole lists of prime public assets are being ploughed down in British Columbia …
and not a head turns.
It’s not a question of profits and private enterprise; it’s now a question of sovereignty.
but not a head turns.
The UN warned, at the time police raided the BC Legislature, that if Organized Crime enters into the governing of a nation, sovereignty is not only lost but is virtually unrecoverable. Then BC lost its railway.
And not a head turned.
.
The HST petition initiative is in support of a draft Bill to “extinguish” the tax. It is to be hoped that all those that signed the petition did so after diligently studying what is supposedly a carefully crafted piece of proposed legislation. Let’s see….
The preamble to the draft Bill cites the Constitution Act (1867), section 92 (2), which refers to the exclusive powers of the provincial legislature over direct taxation for raising revenues for provincial purposes. But the HST, like the PST, is an indirect tax, relying on intermediaries, like retailers, to collect it. Direct taxes are collected directly from taxpayers, like property taxes or, through filing tax returns, income taxes. So if the preamble is so wide of the mark, what about the Bill’s substance?
Part II of the draft Bill would reinstate the 7% PST, with the same applications and exemptions as at June 30th 2010, and “as the only sales tax in British Columbia for the raising of a Revenue for Provincial Purposes.” But there are other “sales taxes,” which with this wording the draft Bill would or could also arguably extinguish. These include the tobacco tax, which at 18 1/2 cents per cigarette accounts for almost half the cost of a package of cigarettes, the motor fuel tax and the carbon tax, all major sources of revenue to fund such provincial priorities as health care and education. In the case of the tobacco tax, there is widespread support here in BC to deter smoking by any means possible short of prohibition. Reducing the cost of a package of cigarettes by $3.70 would be welcomed by smokers, but what would the guardians of our health care system and other anti-smoking advocates say?
Do those who signed the petition really understand what they endorsed?
This is how crazy BC politics can get.
Richard, not to be technical, but both the PST and the HST are direct taxes, in that they are taxes legally payable by the recipient of the of the taxed goods or services (that’s why the provinces have been able to impose PST heretofore – legally the provinces can’t impose indirect taxes). It is true that they’re collected by suppliers, acting as agents of the crown (and that if the supplier fails to collect them, they may be civilly liable for the uncollected tax), but that doesn’t make them indirect taxes (any more than the income tax is an indirect tax when withheld and collected by our employers), the tax is still the legal obligation of the recipient of the supply.
The usual definition of an indirect tax is a tax “which is demanded from one person in the expectation and with the intention that he shall indemnify himself at the expense of another” (Manitoba v. Canada (PC)) The usual example is customs duties, which are paid by the importer, but which everyone knows will be passed on to the ultimate consumer through higher prices. So if HST or PST for goods and services was payable by the supplier of such goods or services, they would be an indirect tax, but both taxes are legally payable by the recipient of the supplies.
So the petition isn’t wrong, at least not for that reason. Mind you, no thinking person would prefer the PST to the HST, so your general point is still valid.
Thanks Bob. That’s the legal definition for constitutional purposes for us in Canada, I guess. I was originally guided by this from Wikipedia: An economic definition, by Atkinson, states that “…direct taxes may be adjusted to the individual characteristics of the taxpayer, whereas indirect taxes are levied on transactions irrespective of the circumstances of buyer or seller.” (A. B. Atkinson, Optimal Taxation and the Direct Versus Indirect Tax Controversy, 10 Can. J. Econ. 590, 592 (1977)). See also “Reforming Indirect Taxes in Canada: Some General Equilibrium Estimates” by Bob Hamilton and John Whalley in another CJE article discussing federal and provincial sales taxes. 22 CJE 561-75 (1989). Is this a case where economists and lawyers have different definitions for the same term?
I’m not sure that even under those definitions, the HST or PST wouldn’t still be a direct tax. It’s true that PST or HST are physically collected by intermediaries, but they do so as agents of the crown, so legally, the tax (as opposed to merely an increase in price equal to the tax) is collected by the crown directly from the ultimate taxpayer (and, in theory, at least, you could tailor the HST or PST for the individual characteristics of the ultimate taxpayer, but in practice, it’s rarely worth doing – the one example I can think of is the exemption from PST for status Indians. You couldn’t do that with a duty or excise tax). That said, I know that sales taxes and VAT are often referred to as indirect taxes, so you’re probably right that its a case where the term has two distinct meanings for different purposes.
I can either go to a province that will tax the parts and raw materials that I buy to put my stuff together or I can go to one that won’t.
and if everyone has such a tax, then what ???
Do you think they’re just going to stash it away like Scrooge McDuck and swim around in it? You don’t think they’re going to try and invest to try to be more successful?
Yes. And No I don’t. Because that is what they have always done before.
This is NOT the first time business taxes have been cut and transfered to consumers. it has been on relentlessly for over 40 years. Adding up all the promises, there should be no unemployment and we’d all be millionaires by now. Instead, we are all getting worse off, but for a small sliver at the top.
So easy with the HST-is-good-for-business-so-its-good-for-everyone BS. its hard to keep my dinner down.
If your issue is with high income earners, we should tax them. Taxing business doesn’t mean you’ll be taxing rich people, necessarily.
My guess:
1. Campbell probably was hoping to quietly introduce the tax. Taxes are a touchy subject; trying to persuade people about the benefits of a “new” tax is difficult. Plus, the Liberals promised they wouldn’t introduce the HST during last summer’s provincial election. Thus, they probably wanted to pass the thing quickly and quietly, and hope people will forget in time for the next provincial election.
2. BC is different from the rest of the country in that it’s a two-party system provincially. That means the NDP has to be centre-left to be electable, as compared to a three-party system where they have to run more from the left to keep clear of Liberal territory. The NDP want to appeal to business, and for many businesses the tax is a bad thing. Plus, with such an unpopular policy, why not oppose it?
3. Because Vander Zalm is opposing the tax. Anybody spearheading an oppose-the-tax movement would probably get attention; he just happens to be the figurehead on top of it.
Marcello:
“Do you think they’re just going to stash it away like Scrooge McDuck and swim around in it? You don’t think they’re going to try and invest to try to be more successful?
Yes. And No I don’t. Because that is what they have always done before.”
One example of “them” “always” doing this “before”? Just one?
@ BC Mary,
Having read your blog, what you have to say is. . .interesting. But I’m puzzled as to what any of it has to do with the debate on hand.
There seems to now be even odder aspect now to whole battle about the HST in BC. As the story below describes as of July 1st BC residents will now be exempt from Washington state sales tax due to an obscure law originally designed to get shoppers from sales tax free Oregon to shop in Washington State. Supposedly many municipalities along the US Canadian border who are entitled to a portion of sales tax revenues were shocked when the state government announced that the HST would not be considered a traditional sales tax and thus the provisions originally intended for Oregon residents would now apply to BC residents too and end up blowing a major hole in their budgets and that of the state.
Its funny how few Americans understand the difference between the GST/HST and traditional sales taxes. However with the current US budget deficit come next year I have a sneaking suspicion many Americans will quickly be learning about the GST.
http://www.king5.com/news/local/Will-wierd-tax-loophole-hurt-states-budget-even-more-96081709.html
Everyone seems to missing a point. It is the combination of the HST and the budget. The budget: Home heat 6%. Hydro going up in increments to 33%. The “carbon tax” 4.45, another hike July 1st. Phone and cable, have the HST applied. Every dammed service or utility you need to run your home is taxed. Everything, from a can of paint to a nail file, has the HST applied. The HST has a very long arm. Food costs have gone up 27%. Insurances, condo fees, trailer pad rent, and home rentals, etc. Everything costs more, price gouging, is rampant in BC. Wage earners, seniors and low income families, are taxed beyond their means. $8.00 per hour for nine years. $1000 per month for seniors, for years, Convince me, these people will survive. A senior paying 14.00 for one chicken, $3.49 for one loaf of bread? There has been a sharp rise, in the number of homeless seniors. We have the highest number of children living in poverty. BC has the highest number of homeless people in the entire country. Look at the entire picture, not just the HST. The tunnel vision in this province, blows me away.
Julie:
Yes, it is important to look at the big picture in many cases. However, almost nothing you just said has very much to do with whether BC HST is good tax policy or not. What are your reasons for believing that HST specifically is not a good tax policy?
Tim,
That’s interesting about the Washington state tax exemption for BC resdients. What an odd exemption. I can see why you might want to exempt non-residents from PST (on the theory that it’ll encourage them to come and shop in your state – not that’s neccesarily smart policy, but I can see a politician pushing it), but why would you only exempt non-residents from tax-exempt states? If that’s your objective wouldn’t it make more sense to exempt all non-residents (or even non-residents from taxed states, who would now have a real incentive to shop in your state).
Of course, it’s an even goofier exemption with respect to BC, since the “tax-exempt” Canadians are still going have to pay the HST on stuff they bring back over the border (thought, admitedly, CBSA administration of that tax is often quite lax). Washington’s giving up their tax Revenue, but BC sure isn’t.
But we shouldn’t be too critical of American cousins for not grasping the distinction between GST and traditional sales tax, as I doubt most Canadians grasp the distinction (or particularly care). If they did, the BC government probably wouldn’t be getting the rough ride it is. But you’re probaly right that the US will implement a VAT of some sort or another in the future, and so they should.
The HST may be a good policy, however, combined with the budget taxes, we are taxed beyond our ability to pay. The HST and the budget, were very poorly planned. Where are the logistics, to lay these taxes on the very people, who can least afford it? Banks, huge corporations, gas and oil company’s, are given millions of our tax dollars. They get big tax reductions, and now the gift of the HST. Big chains, only give their staff, 20 hours per week, to avoid paying benefits. What savings will be passed on to the consumer? Everything from a can of paint, to a nail file, is nailed by the HST. Sounds to me, you can well afford the HST, thousands of us can’t. However, the underground and the barter system, are popping up all over BC. People have made pacts, not to purchase anything that has the HST applied. We have plumbers, roofers, electricians, hair dressers, every trade there is. They are quite willing to work for cash. So, I guess the HST was good for something, after all.
The HST thing will blow over in BC when people realise the world hasn’t come to an end.