Why we think the HST is a good thing for BC
On May 25, 2011, the BC government announced in a news
release that if the HST is kept, the rate will be reduced to 11% on
July 1, 2012, and to 10% on July 1, 2014. Also, one-time payments of
$175 per child will be issued to families with children under 18 years
old, as well as to low- and modest-income seniors. This will be
offset by an increase in the general corporate income tax rate from 10% to
12% effective January 1, 2012, and a postponement of the reduction in the
small business tax rate to zero% planned for April 1, 2012.
The reduction to the HST and the issuance of one-time
payments were included in a binding motion passed in the BC legislature on
May 31, 2011. See the Ministry
of Finance news release.
We thought this would probably convince the HST haters to vote NO
to reinstating the PST, because who would want to keep the higher
tax? However, the result of the BC
HST Referendum is a return to the archaic PST system.
All the same, we'll still present the reasons why we think the
HST is a good thing.
Bruce Hurst, FCGA, Chair of the Certified General Accountants
Association of British Columbia, explained in a news article "Why
I am voting in favour of the HST". One of his points was "In
my view, the consumer either pays the tax directly via a value-added tax
like the HST or indirectly through a tax embedded in the cost of the
product. Either way the consumer pays the tax."
Why was the PST bad?
Much of the cost of the PST to consumers was hidden,
by being embedded in the costs of businesses. This
included the PST on the cost of electricity, gas, computers, equipment, furniture
and fixtures, shelving, vehicles, consumables such
as office supplies, services to repair computers, equipment, etc.
This means that we have been paying hidden PST costs even
on those items on which PST was not added to the selling price,
such as restaurant meals, movie tickets, sporting
events, haircuts, etc.
It was not only a tax on consumers, but a tax on business
investment. If a business wanted to purchase assets to build a
business and hire employees, it would have to pay PST on those
assets. This means that the business has to charge more for its
products, to recover the cost of the PST. The other option would
have been to start the business in a more tax-friendly locality.
Note that large businesses, with taxable sales over $10
million, will not be able to recover the provincial portion of the HST completely
until July 1, 2018, due to the rules on restricted
input tax credits (RITC). These rules apply to specified
property or services, which generally means a road vehicle, energy, a
telecommunication service, or meals or entertainment. No recovery of
the provincial portion of the HST on specified property or services is
available to large businesses until July 1, 2015, and the amount recovered
increases each year until the restrictions are removed effective July 1,
2018.
Although the HST means less work for accountants, most
of them will tell you that they are in favour of keeping it.
BC Tax comparison 2000 to
2011 - see the change in income tax levels from 2000 to present.
Why the HST is good
Reducing government spending
