Business issues are central in the race to be BC Liberal leader and B.C. premier. A series of Business in Vancouver special reports will highlight how the five candidates differ on major policy issues that affect management of B.C.’s economy and business climate.
This week’s focus: the harmonized sales tax (HST) and how changes to it will affect the provincial budget.
All of the leadership candidates want clarity on the HST’s future before September 24.
Kevin Falcon, George Abbott, Mike de Jong and Moira Stilwell said they want the referendum date moved up by about three months.
Christy Clark is against a referendum. The others say that the success of the anti-HST petition made it clear that British Columbians want to have their voices heard.
Clark wants a bill supporting the HST reintroduced in the legislature before March 31. MLAs would be free to vote the way their constituents want them to vote, she told BIV.
“If the HST is still opposed by 75% of the population in March, it’s not going to pass in the legislature,” Clark said. “[The legislature vote] would give MLAs a chance to lead on the issue.”
Clark stressed that she’s only discussing the idea with party members at this point.
B.C.’s agreement with the federal government to implement the HST requires that the rate be 12% until at least 2012.
But Falcon has suggested that he would immediately discuss with the federal government his desire to reduce the HST by 1%, which would essentially drop the provincial sales tax to 6%. He would then reduce the HST by one more percentage point as soon as possible as long as the cut would not derail deficit reduction.
Each 1% cut to the HST would cost the provincial treasury about $800 million.
“That may be the price we need to pay to maintain a good public tax policy because we did such a terrible job of rolling out this policy and explaining it to the public,” Falcon told BIV.
Abbott retorted that the public will view Falcon’s plan to cut the HST rate as “too cute by half.”
Abbott said the initial 1% cut would “put our deficit targets into considerable jeopardy.”
Falcon assured BIV that a 1% HST cut would not jeopardize the province’s plan to reduce its deficit and balance its budget by 2013.
Clark believes tinkering with the HST would be a moot issue because MLAs would vote the tax down in the legislature.
Stilwell and De Jong do not plan to reduce the HST rate.
De Jong and Clark have both estimated a $30 million cost for the province to hold the HST referendum.
Falcon advocates that the government also spend millions of dollars to educate the public on the full cost of the public voting against the HST.
“I don’t want to commit to [saying that it will cost] tens of millions of dollars, because I’m not sure what [the cost of this educational campaign] will be.”
Falcon added that investing in a campaign to explain the HST’s pros and cons is necessary, because of the phenomenal cost of getting rid of the HST.
“A ‘no’ decision [in the referendum] will potentially result in $1.6 billion having to be pulled out of social programs and be returned to the federal government,” Falcon said.
Only about one-third of that $1.6 billion has thus far been spent, but the province has factored into future budget planning an expectation that it will receive the full $1.6 billion.
“There would be costs involved in having to reimplement a 7% provincial sales tax in B.C.,” Falcon said, “and the attendant costs that we would reimpose on the public in terms of the 300 civil servants that we would have to rehire at a cost of $30 million per year.”
He added that small-business owners would also be hit with higher costs because they would have to do paperwork for both the PST and the GST. •