VICTORIA — British Columbia’s harmonized sales tax will be dead by March 31, 2013, the government promised Friday, after it was revealed that B.C. voters had decisively rejected the controversial tax.
“We will return to the [Provincial Sales Tax] with the exemptions that existed before the HST,” Premier Christy Clark declared after the tax was soundly defeated in a landmark referendum.
Results released on Friday, show that about 55 per cent of voters chose to scrap the tax, while about 45 per cent chose to keep it in place.
“The public has very clearly spoken and now is the time to turn the page,” said Clark.
“British Columbians expect us to act on their decision and we will.”
The result of the referendum represents a significant blow to the B.C. Liberal government, which not long ago insisted the HST was the single most important improvement B.C. could make to its economy.
Finance Minister Kevin Falcon greeted Friday’s result saying he was “disappointed” but “not altogether surprised.”
He said the transition back to the PST will cost the province close to $3 billion, and while he dubbed the move as being “manageable,” he warned it’s likely to mean new rounds of belt tightening.
“As government manages to get to a balanced budget it means we will be saying ‘no’ a lot more than we will be saying ‘yes’, particularly for demands to increase spending,” he said.
Falcon explained the cost to provincial coffers will come from the $1.6 billion transition payment B.C. must now return to Ottawa, an estimated $1 billion shortfall in provincial revenues during the first two years of the PST and other costs associated with returning to the old tax.
He added the government will look at a variety of options — including spending reductions and new ways of generating revenue — to fill the fiscal hole. But he made clear his government will do a much better job of consulting the public than it did when it introduced the HST.
“We’ll have a public discussion about that. We’ll be very up front about it,” he said.
“I think the public needs to know that less revenues mean government is going to have to tighten its belt, and we will.”
Falcon also said he will meet next month with federal Finance Minister Jim Flaherty in hopes of negotiating a longer timeline to repay the $1.6 billion in transition funds.
The death of the HST is a significant win for New Democratic Party leader Adrian Dix, who has long opposed the tax, and who has campaigned heavily against it since becoming party leader in April.
“The people won. They won over Liberal arrogance. They won over a campaign which used public funds to try to mislead people about the HST,” said a cheery Dix.
“This is a victory for a progressive tax system and for tax fairness. It means that the people of B.C. who have faced over 10 years of a Liberal government, a shift in the tax burden onto working families, will get some relief,” he added.
The result is also a clear victory for former premier Bill Vander Zalm, who has led a campaign against the tax for close to two years, which forced the recent referendum by collecting more than 500,000 signatures on a petition.
“This is a historic day not only in our province but in our country. It’s the first time in the history of the British commonwealth that the people actually had a say in how they are taxed,” Vander Zalm told supporters in Vancouver after the result was made public.
“It’s a big day for those that didn’t want the tax, because it was a further burden on the income earner, particularly the lower and mid-income earner,” he added.
Conservative party leader John Cummins used the result to attack the Liberals.
“This vote is as much a rejection of the manner in which this Liberal government conducts the people’s business, as it is a rejection of the HST,” he said in a news release.
Peter Leitch, co-chair of the Smart Tax Alliance that led the private-sector battle to keep the tax in place, said he is disappointed in the referendum outcome, but that he accepts the result.
“We have to work with the hand we were dealt now and the public was obviously still angry about the way it was brought in,” he said Friday.
With the HST defeated, Leitch said he thinks government needs to come up with an alternative tax policy that includes some of the business benefits of the HST.
“I can’t speculate what it would look like but I think we all recognize that the old PST system was antiquated. It wasn’t a fair tax and certainly there was a lot of hidden PST in goods and services that people didn’t see.”
It was a suggestion Falcon shot down immediately.
“I think that would be disrespectful to the democratic process,” he said of returning to a significantly altered version of the PST.
“I think we just have to respect that the democratic process spoke and we’re going to listen.”
The HST was first announced on July 23, 2009 by then-premier Gordon Campbell — who resigned amid a furore over the tax — and then-finance-minister Colin Hansen.
The announcement to adopt the tax came on the heels of the 2009 provincial election, leading to widespread criticism that it was sprung on the electorate without notice.
The tax has also been criticized because more items were taxed under the HST than under the PST.
An independent report done earlier this year found the HST would cost the average family about $350 more per year.
Recognizing that burden, Clark announced in May that she would cut the HST by two points if British Columbians voted to keep the tax.
The cut would have been in two stages: from 12 per cent to 11 per cent on July 1, 2012; and then to 10 per cent on July 1, 2014.
Clark had also planned to send cheques to all families with children under 18, and all lower income seniors if the tax had survived the referendum.
Those measures will not take effect now that the tax has been defeated.
The death of the HST also means the low-income tax credit and the home heating tax rebate associated with the HST will come to an end. On Friday, Falcon said these programs will stop on the day the province returns to the PST.
In total, 881,198 people voted to scrap the HST, close to 150,000 more than voted to save it.
The result was well above the 50 per cent threshold needed in the binding referendum, making it a decisive victory.
The number, however, is drastically short of what would have been needed to kill the tax if former premier Campbell had not changed the threshold for success.
Under the initial rules, Fight HST would have needed 50 per cent of all eligible voters — or about 1.5 million people — to vote in favour of killing the tax for the HST to be scrapped.
If those rules had been applied, Friday’s vote tally would have failed by more than 640,000 votes.
Asked about the wisdom of changing the threshold, Falcon refused to defend Campbell’s decision to change the rules.
“I’ll leave it to the people who made that decision to explain the decision,” he said.
“All I would say is that there wasn’t a broad lengthy discussion about that decision.”
Source: www.vancouversun.com - August 26, 2011