Since the federal campaign has yet to really heat up, I thought I'd take the time to once again talk about something I feel strongly about - the HST. It's probably going to be the next major vote after the federal election.
On July 1, 2010, BC introduced the Harmonized Sales Tax (HST) along with Ontario, joining three eastern provinces, New Brunswick, Newfoundland and Labrador, and Nova Scotia, in implementing the HST. Simply put, the HST is the harmonization (hence the name) of the provincial sales tax (PST) and the federal goods and services tax (GST) (Canada Revenue Agency). The BC HST rate is 12%, composed of a 5% federal portion and a 7% provincial portion (Ibid.).
The implementation of the HST in BC set off a political firestorm, since, during the 2009 campaign, Premier Gordon Campbell effectively promised not to implement it. Indeed, an Ipsos Reid/Global News poll conducted shortly after the BC government’s apparent about-face found that fully 85% of British Columbians opposed the HST. This initial opposition led former premier Bill Vander Zalm to organize the Fight HST group, whose most prominent action was a petition against the HST, which garnered over 700,000 signatures, and forced the provincial government to submit the HST to a referendum, scheduled for September 24, 2011.
Since then, opposition has steadily fallen, with the most recent Angus Reid poll indicating 54% of British Columbians oppose the HST.
On November 3, 2010, Premier Campbell announced his intentions to resign as premier and leader of the BC Liberal Party. His successor, Christy Clark, was chosen at the BC Liberal leadership convention on February 26, 2011, and officially sworn in on March 14, 2011. One of Clark’s first moves was to move the HST referendum up 3 months to June 24, 2011.
The first and foremost concern for those against the HST is the potential rise in costs for individuals. Those opposed to the HST claim that prices have gone up even beyond the additional 7% on goods and services previously exempt from the PST (Fight HST 3). They say that it is just a massive tax grab to increase the tax burden on the average British Columbian (Fraser Institute). However, the HST is actually revenue-neutral for the government, and with accompanying income tax cuts and a rebate cheque for low income citizens, “the HST essentially will have no impact on the total tax bill paid by the average family” (Ibid.). Furthermore, a report put out by the TD Economics states that the “majority of goods purchased by households…will not cost a penny more, and some may cost less” (1). TD concedes that overall consumer prices are expected to rise initially, but will within three years be offset by lower costs being passed on to the consumer (Ibid. 2). Indeed, this is demonstrated in the latest BC Stats report on the CPI, which shows that the CPI for BC did spike relative to the national average in July 2010, but within the next few months returned to levels very similar to the national average (1). This would appear to show that Fight HST’s claims about rising costs are unfounded.
Of course, with the HST being an economic issue, a major concern is its impact on the economy, and of particular importance is unemployment, which affects citizens that most. The Fight HST campaign claims that “implementing the HST in BC would…create job losses for a minimum of 5 years” (3). On the other hand, the BC Government’s HST in BC website claims that the HST is expected to create 113,000 new jobs by 2020. The latest BC Stats report on unemployment gives a clear picture – the graph indicates that unemployment in BC declined steadily from the recession peak in mid-2009, regardless of the HST, and only spiked in early 2011 due to a large increase in participation in the labour force (1). Also, employment in BC in February 2011 was up from both a month ago and a year ago (Ibid. 2), seemingly disproving the Fight HST claim that the HST would induce job losses.
Another notable macroeconomic indicator is the GDP, from which we can measure economic growth. The Fight HST group claims that the implementation of the HST would be bad for the economy (3). However, the Fraser Institute claims that the “HST will help BC recover from recession more quickly.” Also, the Government HST in BC site claims that the HST would help to “generate economic growth.” The BC Government hasn’t posted GDP data after the HST, but “since [BC and Ontario] make up 50% of overall Canadian economic activity, any impact harmonization may have on their performance will ripple through to the national headline economic figures” (TD Bank Financial Group 1). That means we can use national GDP figures to see the impact of the HST on economic growth. Data from Statistics Canada’s latest quarterly release on economic accounts indicates that real GDP has risen steadily since the depths of the recession in 2009. Even though there was a slight slowdown in the middle of 2010, the economy picked up again towards the end of the year (Ibid.). Once again, Fight HST’s claims seem to be disproven by economic indicators.
Another concern opponents of the HST have is that rising costs will deter consumers and lower consumer confidence. Fight HST claims that ever since the HST was implanted in BC, “consumer confidence…has dropped significantly” (2). TD agrees, saying that strength in consumption before the HST might be due to anticipation of higher taxes and that there could be a corrective period, but only for a few months, stressing that in the long run “consumer spending is not expected to be greatly affected” (1). Consumer confidence figures from the Conference Board of Canada do substantiate the concerns, with the Vancouver Sun reporting a huge slide of 12.5 points to 78.9 for BC in July 2010. However, as CKNW reports, BC’s consumer confidence bounced back within months, just as TD predicted, to stand at 102.2 by January 2011, well above the national average of 88.1. Fight HST’s claims also seem to fall short on this measure.
From the economic analysis of the HST, I can see no good reason for the opposition of the tax. Prices have stayed with the national average, jobs have been created, the economy has grown, and consumption has not been affected much with the implementation of the HST. Indeed, with the facts that the HST simplifies taxation and saves the BC government millions (Fraser Institute), the HST is a more progressive tax scheme which taxes the rich more (Ibid.), and that repealing the HST will lose the province $1.6 billion of federal transfers (Vancouver Observer), I have decided that I will vote to keep the HST in the June 24 referendum.
Sources“Harmonized sales tax (HST).”
www.c
ra-arc.gc.ca. Canada Revenue Agency, 2010.
“Ipsos Reid/Global News HST Poll.”
Global BC. CW Media Inc., 5 Aug. 2009.
Canseco, Mark. “Governing BC Liberals Extend Lead as Clark Becomes Premier.”
Vision Critical. Vision Critical, 22 Mar. 2011.
“Top 18 Liberal Myths about the HST – Part II.”
Fight HST. Fight HST, n.d.
Lammam, Charles, and Niels Veldhuis. “HST fears unfounded; new study clarifies myths about BC’s harmonized sales tax and explains problems with the PST it replaces.”
Fraser Institute. Fraser Institute, 29 Jun. 2010.
“The Economic Impact of HST Reform.”
TD Economic. TD Bank Financial Group, 6 Jul. 2010.
“Consumer Price Index – January 2011.”
BC Stats. BC Stats, 18 Feb. 2011.
“Building the Economy.”
www.hstinbc.ca. British Columbia, n.d.
“Labour Force Statistics – February 2011.”
BC Stats. BC Stats, 11 Mar. 2011.
“Canadian economic accounts.”
www.statcan.gc.ca. Statistics Canada, 2011.
“BC consumers’ confidence hits the skids.”
Vancouver Sun. Postmedia News, 27 Jul. 2010.
“BC consumer confidence soars despite HST.”
CKNW. CKNW, 25 Jan. 2011.
Posyniak, Thomas. “The unhappy reality of revoking the HST.”
Vancouver Observer. Can Do Media Inc., 23 Jun. 2010.
