itsyour decisionhstgstpst

8/6/2019 ItsYour DecisionHSTGSTPST

http://slidepdf.com/reader/full/itsyour-decisionhstgstpst 1/28

HST or PST/GST?

IT’S YoUr DECISIoNTHE INDEPENDENT PaNEl’S rEPorT

MaY 4,2011



Dar British Columbian,

You hav an important dcision to

mak this summr.

That’s whn you will vot in a provinc-

wid rrndum asking you and your llow

British Columbians to mak a choic — kp

th HST or rturn to th PST/GST.

Th rason or this rrndum is clar.

Last July 1, th provincial govrnmnt

brought in th 12 pr cnt Harmonizd Sals

Tax (HST). It blndd th svn pr cnt

Provincial Sals Tax (PST) with th v pr

cnt dral Goods and Srvics Tax (GST).

Thr was no public consultation with you

or othr British Columbians. Th rsult was

conusion, angr, political discontnt and aptition signd by hundrds o thousands o

citizns dmanding a rrndum to lt th

popl dcid.

This panl, and th rport you ar about

to rad, was born out o that public outcry.

W ar our citizns—an conomist, a

ormr B.C. auditor gnral, a bankr and a

ormr Albrta nanc ministr. Our job has

bn to indpndntly assss and prsnt

th positivs and ngativs o ach sals

tax systm.

Ovr th last dozn wks w’v spnt

hundrds o hours talking about ach sals

tax and rading submissions rom British

Columbians, associations and businsss.

W hav gathrd th bst inormation w

could nd to prsnt to you.

W’ll admit — It’s bn a struggl. Som

o th acts about th HST and PST/GST

ar crystal clar. Othr acts will tak tim

to mrg. Tax policy is complx and it’s

not always asy to arriv at black and

whit conclusions.

Th procss o prparing this rport has

shown us much o th dbat ovr th HST

and PST/GST rmains lld with actually

incorrct inormation. W bliv that bttr

inormation, including th good and th bad

about ach tax systm, is critical or thr

to b a succssul rrndum – no mattr

th rsult.

Citizns usually lav such tax policy

qustions to th provincial govrnmnt.

During this summr’s rrndum, BritishColumbians will mak history. You will dcid

th utur o th HST. Th qustion bor

you is:

Are you in favour of extinguishing the HST

(Harmonized Sales Tax) and reinstating the

PST (Provincial Sales Tax) in conjunction

with the GST (Goods and Services Tax)?

Yes or No

Our job isn’t to tll you how to vot. It is to

look at th acts and or our bst analysis.

Now it’s your dcision.

Sincrly,



TaBlE oF CoNTENTS

WHY SalES TaxES MaTTEr 2

YoU, YoUr FaMIlY aND SalES TaxES 5

IMPaCT oN THE ECoNoMY, BUSINESSES aND JoBS 12

IMPlICaTIoNS oF GoING BaCk To THE PST/GST 18

rEPorT SUMMarY 21

PaNEl MEMBErS 22

rEFErENCES aND DaTa SoUrCES 24

SUBMISSIoNS rECEIVED BY THE INDEPENDENT PaNEl 25

IT’S YOUR DECISION

PAGe



It’s air to say vry w o us lik to pay

taxs. espcially sals taxs.

Yt th truth is sals taxs mattr. Thy

hlp pay or th public srvics British

Columbians xpct — univrsal halth car,schools and univrsitis, policing, roads and

highways, to nam just a w.

British Columbians hav bn paying

sals taxs or ovr 60 yars. Thy ar a

oundation o th provincial budgt. This

yar sals taxs will rais almost twic as

much as th rvnus rom our orsts,

minrals and nrgy. Rvnu rom th

sals tax quals th total incom taxs paidby individuals.

I B.C. liminatd th sals tax — whthr

it’s th HST or PST/GST — thr would

b a $5-billion to $6-billion hol in th

$41-billion budgt. To compnsat th

govrnmnt would nd to incras thdcit, rais othr rvnu or cut spnding

on srvics. Or do a combination o

all thr.

Th govrnmnt’s job is to nd th right

mix o tax and othr rvnu options to

und public srvics that ar ssntial to

our quality o li. Th govrnmnt must

dvis a rvnu plan that passs th

tst o airnss and kps our conomy

comptitiv, growing and crating jobs.

2

HoW THE ProVINCE raISES MoNEY2011/12 – $41.3 BILLION

WHY SalES TaxES MaTTEr

Natural Resources

Other RevenueOther Tax

HST

18%

14%

14%

14%

8%

7%

4%

21%

Personal Income Tax

Corporate Income Tax

Crown Corporations

Federal Transfers

“British Columbians need to recognize that although nobody like taxes, government needs to raise taxes in order to provide the services that we all need.” anne agie


Source: B.C. Budget (201



It’s a constant balancing act.

I incom tax and sals tax rats ar too

high, popl may mov away or th numbr

o popl moving to B.C. will dclin. High

sals taxs dampn spnding and that slowsth conomy.

I businss tax rats ar too high, thy’r

a drag on th conomy, chasing away

invstmnt and making it dicult to compt

in markts byond our bordrs. That mans

wr jobs.

evry govrnmnt has its own ways o raising

rvnus. All provincs — xcpt nrgy-rich

Albrta — rly on sals taxs as an importantsourc o rvnu.

Thr’s anothr prssur acing govrnmnts

— our population is aging.

Baby boomrs ar ntring thir rtirmnt

yars, a tim whn mploymnt incom

drops. That mans a dclin in incomtax paymnts at th vry tim thir us o

xpnsiv public srvics—spcially halth

car—bgins to ris. Just as th prcntag

o rtiring British Columbians is rising, th

prcntag o working citizns—paying

taxs on mploymnt incom—is dropping.

That will crat a unding crunch or th

govrnmnt ovr tim.

W’r alrady sing signs o th problm.Spnding on halth car in B.C. is growing

mor than twic as ast as th govrnmnt’s

rvnu growth. This trnd is xpctd to

incras as baby boomrs ag.

3

HoW THE ProVINCE SPENDS MoNEY2011/12 – $41.9 BILLION

Health

42%

27%17%

8%6%

Other

Interest on Debt

Social Services

Education

“We continue to be extremely dismayed with the introduction and thoughtless implementation o the HST at a time when the Canadian economy was adversely aected by the USA andinternational fnancial market melt-down.” rbet lintte – lintte Pjects Inc

Source: B.C. Budget (2011)



“As a consumption tax the HST is efcient. There are no loopholes, exemptions or specialinterest groups or deductions.” Pu Mce, a & a Tding ltd

I govrnmnts ar to adquatly und

public srvics and avoid cutbacks, tax

hiks or dcits that add to provincial dbt,

thy must hav rliabl and robust sourcs

o rvnu.

It’s also important to not th mak-up o

th B.C. conomy, lik othr provincs, has

changd. Whn th PST was introducd

in 1949, it was a tax lvid mainly on

an conomy thn dominatd by th

manuacturing o goods.

Ovr th dcads w’v volvd into a

mixd conomy, on that still crats

goods but has sn th rapid xpansion

o srvics. Undr th PST, much o th

srvic conomy wnt untaxd. Undr th

HST, most srvics ar taxd. That mans a

broadr tax bas and a mor stabl sourc

o rvnu or govrnmnt.

On thing is clar— sals taxs ar ssntial

to th B.C. govrnmnt’s rvnu bas.

Whthr you vot to rturn to th PST/GST

or kp th HST, thr will still b a sals

tax in B.C. atr th rrndum.

Sales Tax Personal Income Tax Natural Resources Federal TransfersOther

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 10

ONTARIO

MANITOBA

ALBERTA

B.C.

SASKATCHEWAN

QUEBEC

NEW BRUNSWICK

NOVA SCOTIA

P.E.I.

NEWFOUNDLAND

HoW ProVINCES raISE rEVENUEPeR CeNT OF TOTAL ReVeNUe – 2010/11

4

Source: Provincial Budgets (2011



It’s bst to stat th act: Th majority o

British Columbians ar paying mor at

th cash rgistr sinc th introduction o

th HST.

Atr studying th numbrs and consulting

with conomists, hr’s what w’v

concludd:

• Bitish Cumbin miies py n

vege $350 me evey ye n

utine ependitues unde the HST

•The me yu spend, the me HST yu

py The me yu en, the me yu’e

iey t spend

• I yu miy is ne the 15 pe cent

BC miies tht ept incme

ess thn $10,000 ye, yu’e ctuybette unde the HST

• a BC tpyes’ HST csts e ptiy

set thugh incme t eie

• ove 80 pe cent yu husehd

spending is ted s it ws bee

the HST

•The HST wi s cst yu me i yu

buy newy buit hme tht is wth

me thn $525,000

WHaT’S CHaNGED aT THE CaSH

rEGISTEr?

Bor last July 1, th v pr cnt dral

Goods and Srvics Tax (GST) and svn

pr cnt Provincial Sals Tax (PST) wradministrd as two sparat sals taxs.

Atr July 1, both th PST and GST wr

blndd into th 12 pr cnt Harmonizd

Sals Tax (HST).

THIS IS WHaT IS NoW HaPPENING aT

THE CaSH rEGISTEr

•17 pe cent yu spending hs n et

seven pe cent ses t

• 29 pe cent yu spending is subject

t the sme tt ses tes s bee It

hs nt gne up dwn

• 54 pe cent yu spending is nt

tbe unde the HST the PST/GST

Nthing hs chnged

YoU, YoUr FaMIlY aND SalES TaxES

Sinc th HST was introducd you’v hard a lot o

conficting statmnts.

‘The HST is csting me nd Bitish Cumbins me

thn the PST/GST did’‘Thee’s ey n chnge I might even be bette

thn bee’

“I fnd the basics o this tax sound, but it has been enlarged to cover [restaurant and snack] ood, [adult sized] clothing or children and a couple o other items. Please consider a simple change back to original basics.” Bi lwence, Dwsn Cee

5



WHaT’S CHaNGED aT THE CaSH rEGISTEr?

29%

17%

Not taxable under HST or PST/GST

Taxable under HST and PST/GST

Newly taxable under HST

54%

So THIS IS a Tax SHIFT To CoNSUMErS?

Ys, but thr is a bnt to you and th

provincial conomy.

W all know that to mak a product or

srvic, businsss pay or itms lik powr,

hat, rnt and computrs. Undr th PST,

businsss paid th svn pr cnt sals taxon thos purchass. Whil you nvr saw

it on your bill most o that PST was addd

onto th nal pric you paid at th cash

rgistr. Call it th invisibl PST paid by you,

th consumr.

Undr th HST systm that’s changd. Most

businsss rciv a ull rbat on sals tax

paid on itms thy buy to mak a product or

srvic. That mans thy no longr add th

invisibl PST to th nal pric thy charg

you. Businsss can pass on thir HST

rbats to you in th orm o lowr prics or

us thir savings to invst in nw quipmnt

and productivity. This should gnrat

conomic growth, which th panl discusss

in th nxt chaptr.

“Since the implementation o the HST seniors eating at our senior center now have to pay the HST. This has cut down on the attendance to our meal program.”kthy Ndin, Pince Gege

6

Source: B.C. Ministry of Finance



WHaT’S CHaNGED, aND WHaT HaSN’T, BETWEEN THE HST aND PST/GST

7

SPENDING CaTEGorIES ExaMPlES

UNCHaNGED – Itms that

ar not taxd undr ithr

th HST or th PST/GST

•Rnt

•Mortgag paymnts

•Basic grocris

•Child car xpnss

•Prscription drugs

•Public transit

•existing housing

UNCHaNGED – Itms

that wr taxd with th

5% GST plus th 7% PST

and ar now chargd th

12% HST

•Almost all houshold goods such as cars, urnitur, lctronics

and appliancs.

•Almost all clothing, ootwar and bauty products.

UNCHaNGED – Itms

taxd with th 5% GST

but xmptd rom th

provincial portion o th

HST by th Provinc.

•Motor uls

•Books

•Childrn-sizd clothing and ootwar

•Childrn’s car sats and car boostr sats

•Childrn’s diaprs

•Fminin hygin products

•Hom nrgy us

CHaNGED – Routin

spnding that usd to b

taxd with th 5% GST

but is now taxd th

12% HST

•Rstaurant mals and snack ood

•Hairdrssing and manicurs

•Most rcration itms such as movis, gym mmbrships

and magazins

•Maintnanc and rpair srvics not taxd undr PST (.g. gardning)

•Bicycls

•Tobacco products

•Prossional srvics

CHaNGED – Non routin

spnding that usd to b

taxd with th 5% GST

but is now taxd th

12% HST

•Nwly built hom sals (lss rbat)

•Convyancing costs such as raltor commissions

•Structural hom rnovations

•Structural hom rpairs


0%➔0%

5%➔5%

5%➔12%

5%➔12%

5%+7%➔12%

THEN NoW



WHY Do YoU THINk BUSINESSES WIll

PaSS oN THEIr HST Tax rEBaTES

To ME?

Critics o th HST hav suggstd businsss

do not pass through thir HST savings to

th consumr. Howvr, xprinc in othr

jurisdictions shows, ovr tim, comptition

orcs businsss to pass on ths HST

savings to consumrs. I thy don’t, thy

los customrs.

Whn Canada’s Atlantic provincs adoptd

th HST in 1997, thr was an arly incras

in infation. It was tmporary, howvr. Atr

looking at th xprinc o othr jurisdictions

that adoptd valu-addd taxs such as th

HST, our assumption as a panl is 90 pr

cnt o businss’ HST rbats ar passd onto th consumr.

WHaT PrECISElY IS THE ToTal Tax

SHIFT To THE CoNSUMEr?

Atr carul considration, th panl has

concludd that in 2011/12:

•Becuse me things e ted thn

bee — incuding newy buit hmes —

miies nw py tt $133 biinme in ses t te HST ebtes nd

t bes e ten int ccunt

•Businesses wi py but $730 miin

ess in tes

8

“For B.C.’s businesses to remain competitive, a value-added sales tax, like the HST,is a necessity.” Institute Chteed accuntnts

WHaT IS THE ToTal Tax PaID BY FaMIlIES aND BUSINESSES?

Tt PST Tt HST less HST rebtes nd T Bes Dieence

(Biins ds)

Familis 3.81 5.14 -0.41 1.33

Businss 0.85 0.12 -0.73

WHo PaYS THE HST (BY INCoME BraCkET)

Source: Statistics Canada

Source: B.C. Ministry of Finance and Panel Estimates



THE HST rEBaTE – SoME ExaMPlES

9

“The [low-income] credit largely o-sets the higher HST costs or the poorest BritishColumbians, but its early and quick phase-out means that many modest and middle-income households will be acing higher costs.” Cndin Cente Picy atentives

HoW MUCH MorE DoES THE aVEraGE

FaMIlY PaY UNDEr THE HST?

Th avrag amily paid $1,169 a yar in

sals tax undr th PST/GST. Undr th

HST, that amily now pays $350 mor in

sals tax.

But vry amily pays dirnt amounts osals tax dpnding on how much thy arn

and what thy buy.

A gnral rul o thumb is high-incom

arnrs, who spnd mor, will pay mor

sals tax undr th HST.

Thos who arn lss spnd lss and pay lss

sals tax.

Th lowst incom arnrs ar shildd rom

th mov to th HST through a sris otax rbats.

HoW Do Tax BrEakS or rEBaTES

For CoNSUMErS Work UNDEr

THE HST?

To cushion th ct o th HST th

provincial govrnmnt introducd two

masurs that giv back mony to

individuals and amilis.

Th rst applis to vry taxpayr. Th

govrnmnt incrasd provincial incom

tax xmptions to hlp popl adjust to th

HST. It’s $80 pr yar or singl taxpayrs or

$160 or a coupl.

Th scond HST tax brak applis i you’r a

low-incom amily. It’s th HST tax rbat —

a chqu maild to you vry thr months.

It tops out at $230 pr amily mmbr and

scals back as your incom riss.

*Income is ‘adjusted income’ as calculated for income tax purposes

Source: B.C. Income Tax Act

Fmiy Size Fmiy Incme* HST rebte

1 $20,000 $230

1 $25,000 $30

3 $20,000 $690

3 $30,000 $490

3 $40,000 $90



“Since more goods and services are taxed under the HST than the PST, consumers ace an additional tax burden. Some o the goods and services taxable under the HST but not under the PST are, in no particular order, postal services, taxis, unerals, real-estate commissions, haircuts, parking, and restaurant meals.” Hemut Pstic, Cent 1 Cedit Unin

I yu Fmiy* MesYu Net Incese ateIncme T rebtes

Net Incese s % Fmiy Spending

<$10,001 -73 -0.7%

$10,001 – $20,000 32 0.1%

$20,001 – $40,000 129 0.4%

$40,001 – $60,000 366 0.8%

$60,001 – $80,000 527 0.9%

$80,001 – $100,000 657 0.9%

>$100,000 1,029 1.0%

avege $350 0.7%

HST IMPaCT aFTEr Tax rEBaTES

10

CaN YoU GIVE US SoME rEal-lIFE

ExaMPlES oF WHaT a FaMIlY PaYS

UNDEr THE HST?

I your amily* has an incom o lss than

$10,000 a yar (as 15 pr cnt o B.C.

amilis do) you ar rciving HST rbat

chqus in th mail. It mans th $216

in sals tax you paid undr th PST/GST

systm has actually dcrasd by $73 a

yar, to $143.

I you and your amily ar at th highr nd

o th incom scal — making mor than

$100,000 a yar — you pay th most. Th

HST adds $1,029 a yar to th $2,738 in

sals taxs paid undr th PST/GST.

Most amilis will b somwhr in btwn

this rang undr th HST.

Th $350 avrag sals tax pr amily dos

not includ th HST you now pay whn you

buy a nwly built hom. How much that

costs varis rom amily to amily, sinc not

vryon buys a nwly built hom. Som

prr pr-ownd homs that ar HST

xmpt. Thos amilis that do buy nwly

built homs pay dirnt prics, a choic thatdtrmins th amount o HST paid.

Hr’s an xampl: I you buy a nwly built

hom worth $685,000 (th mdian singl

amily hom pric in Mtro Vancouvr) you’r

paying $8,000 mor sals tax than undr

th PST/GST. I your nwly built hom costs

undr $525,000 you’r paying no mor sals

tax than you did bor.

Source: Statistics Canada, B.C. Ministry of Finance and Panel estimates

*A family includes one or more individual B.C. taxpayers.



“[M]y husband and I have noticed the extra costs o eating out, hair cuts and ood purchases other than basic items and so on. But we also understand the huge cost to rescind the HST.”Mjie nd an Nevisn, Victi

WHaT’S HaPPENED aT THE CaSH

rEGISTEr DUrING THE FIrST YEar oF

THE HST?

It will tak tim to ully judg th impact o

th HST. B.C.’s Consumr Pric Indx shows

an initial spik o 1.1 pr cnt in th rat o

infation rom Jun to July, whn th HST

was introducd. That was highr than th

national infation rat o 0.5 pr cnt or th

sam priod.

B.C.’s ovrall infation rat is now clos to

th national rat.

In summary, undr th HST th avrag

amily pays mor in sals taxs. Low-

incom amilis ar shildd rom th HST.

High-incom and middl incom amilis

pay mor bcaus thy spnd mor. And

whil th cost o most goods and srvics

wnt up in th rst months o th HST, th

rat o infation now tracks clos to th

national avrag.

Tax PaYaBlE oN NEWlY BUIlT HoMES

CoNSUMEr PrICE INDEx

Provincial Portion of the HST

$0

$10,000

$20,000

$30,000

$40,000

$50,000

Previous Invisible PST

$ 3 0 0

, 0 0 0

$ 4 0 0

, 0 0 0

$ 5 2 5

, 0 0 0

$ 6 0 0

, 0 0 0

$ 7 0 0

, 0 0 0

$ 8 0 0

, 0 0 0

$ 9 0 0

, 0 0 0

$ 1, 0 0

0, 0 0 0

11


Source: B.C. Stats



“A reality that has seldom been mentioned in the HST debate is that the provincial government actually has relatively ew policy levers available to attract investment, oster the growth o high-paying private sector jobs, and enhance B.C.’s competitiveness. The design o the consumption tax regime is one area where the province has the capacity to shape the economic environment in a positive way.” Business Cunci Bitish Cumbi

Atr consulting conomists and rading

a wid assortmnt o studis, including

on th panl commissiond, hr ar

our conclusions:

•Vituy ecnmic nysis fnds

the HST inceses ecnmic gwth,

pductivity, wges nd the quity

jbs

•Thee is n cnsensus n the vue nd

timing thse benefts

• a mve bc t the PST/GST wi ieyhve negtive impct n business

nd invest cnfdence becuse

uncetinty ve t picy

•The pne’s cmmissined nysis

cncudes the ecnmy wi get bigge

bst unde the HST thn it wud unde

PST/GST Unde the HST, the size theecnmy wi be $25 biin ge in

2020 thn it wud hve been with the

PST/GST Tht’s but 11 pe cent

highe gwth

• Sm nd ge businesses sve t est

$150 miin in dministtive csts

becuse they nw cmpy with ne t,

nt tw

• Businesses such s estunts ndhi sns, ecetin/entetinment

businesses nd buides newy buit

hmes, hve seen n initi negtive

impct n ses unde the HST

• Bns, cedit unins, insues, dcts

nd ent ptment wnes e hut

unde the HST becuse they hve t

py HST n items they buy t pvide

sevices Hweve, they dn’t quiy HST ebtes s d the cmpnies

IMPaCT oN THE ECoNoMY,BUSINESSES aND JoBS

I

you’r having troubl guring out th HST’s impact

on th conomy, you arn’t alon. W hard widly

divrgnt viws rom conomists, businss groups

and citizns.

‘… the HST is the singe mst imptnt thing tht cn be

dne t hep gw the BC ecnmy, ceting 100,000

me jbs’

‘ … the HST wi be the deth ne t sme

businesses nd my even esut in the BC ecnmy

sighty shining’

12



WHaT IS THE IMPaCT oF THE HST aND

PST/GST oN THE ECoNoMY?

W hard a rang o dirnt answrs on

th conomic bnts o th HST vs. PST/

GST. Th panl commissiond its own

analysis o th impact o going back to th

PST/GST. Our indpndnt analysis ound:

•a etun t the PST/GST wud me

BC epts ess cmpetitive nd dmpen

business investment

•I the HST system cntinues, the

ecnmic benefts wi buid swy

•I the HST is et in pce, by 2020 it

wi esut in:

•a $25-biin incese in the

tt ecnmy

•11 pe cent in highe gwth Tht’s

but $480 pe pesn $830 pe

miy

•a u pe cent bst t investment in

mchiney nd equipment

•a $12-biin bst in dditin

epts, but 12 pe cent highe

thn it wud hve been unde the

PST/GST

•24,400 me jbs thn unde the

PST/GST, ne pe cent incese in

tt empyment

economic orcasting – spcially ovr

10 yars – is an imprcis xrcis.

Nonthlss, th panl blivs this analysis

is a rasonabl prdiction o improvd

conomic prormanc as a rsult o th

mov to th HST.

13


“[I] we purchase a hal-million-dollar machine the tax we get back will actually pay or a new pickup or the operator to drive to work on the machine. The tax we save on the pickupwill pay the wages or an operator to run that machine or the month...”Mnty Hussey, Tit Cntcting



“Some o our members build single amily residential homes and that sector has seen a slowdown which may at least in part be due to the HST and the uncertainties surroundingits longevity.” BC Cnstuctin asscitin

HoW DoES THE HST IMPaCT

INVESTMENT IN BC?

Thr’s littl doubt th HST crats a

climat that avours mor invstmnt

by businss.

For on thing, rmoving th PST rom

invstmnt in buildings and all machinrymaks thm lss xpnsiv. That’s an

incntiv to modrniz that improvs

productivity and comptitivnss and

crats bttr paying jobs.

Considr th construction industry, which

crats on in 12 jobs in B.C. Rmoving

th PST on itms lik construction matrials

liminats costs qual to about ight pr

cnt o th industry’s contribution to th

provincial conomy. That maks it chapr

to build and ncourags mor construction.

According to our conomic analysis,

undr th HST invstmnt in machinry

and quipmnt is xpctd to incras by

our pr cnt by 2020. Non-rsidntial

construction is xpctd to incras by

1.4 pr cnt.

Howvr, th switch to th HST is rgardd

lss avourably by nw hom buildrs.

Homs thy build now ac th 12 pr cnt

HST, not just th v pr cnt GST undr

th prvious systm. For thos paying mor

than $525,000 or a nwly built hom, it

mans paying mor sals tax than bor.

Som o that impact will b diminishd bylowr construction costs that will rduc

th pric. But th sals tax costs o buying

a nwly built hom with a pric tag abov

$525,000 ar now highr.

Our analysis suggsts this ngativ impact

o th HST will b short-livd. By 2014,

rsidntial construction will ris bcaus th

HST systm will incras conomic activity,

wags and jobs. By 2020, rsidntialconstruction will b 1.9 pr cnt highr

undr th HST than it would hav bn

undr th PST/GST.

MoNTHlY HoUSING STarTS IN BC aND CaNaDa

14




“To give an example o how onerous the administrative work was... when we bought a can o methyl alcohol to thin paint and clean our equipment, the portion used to thin the paint was tax exempt, the portion to clean the equipment was taxable.”Ed Benge, Hnsen Industies

HoW DoES THE HST IMPaCT ExPorTS?

B.C. rlis on xports to crat jobs and

grow our conomy. Th HST is an advantag

to companis that sll goods and srvics

byond our bordrs.

Why? Most xport prics ar st globally.

Canadian xportrs produc as much asthy can protably sll at thos prics. Th

HST lowrs th cost o production, maning

xportrs can produc mor with thir

invstmnt in a businss. That mans mor

rvnu, mor sals and mor jobs.

This HST advantag to xportrs — whthr

thy ar xporting srvics or goods such as

coal or lumbr products — bnts both our

rural and urban conomis.

It works somthing lik this. A lumbr

producr in Princ Gorg, a min in

southast B.C. or a movi producr in

Vancouvr, or xampl, no longr hav

to pay sals tax on itms lik lctricity,

hating ul, computrs and vhicls

usd in production. This puts thm on

th sam ooting with th mor than 140

othr countris that hav gon to valu-

addd sals taxs, such as th HST, tomak thir xports comptitiv in th

global marktplac.

WHaT IS THE EFFECT oN SMall

BUSINESSES?

Small businsss ar crucial to th

B.C. conomy. Firms o wr than

50 mploys account or:

•98 pe cent businesses

•Tw ut evey 10 pivte sect jbs

•41 pe cent epts

•one-thid the tt ecnmy

Th HST is a bnt to this important sctor

As xplaind arlir, th HST rmovs th

PST rom th cost o production. That maks

it chapr to produc goods and srvics,

hlping ovrall sals and xports.

Th HST also maks bookkping simplrand chapr or small businss. Complianc

with only on sals tax (HST) vs. two

(PST and GST) is particularly important

or small rms, which otn don’t hav th

sam administrativ rsourcs as largr

companis.

Som small businss ownrs s th

HST as a nw cost burdn. Itms such as

commrcial rnt, raw matrials and goodspurchasd or rsal or to b incorporatd

in a product now bcom subjct to sals

tax. Howvr, th HST paid by most small

businsss is ully rundd to thm.

Whthr you run a small stor, a rstaurant

or a prsonal srvics businss, it mans th

HST systm will dcras your costs.

15



“The HST created a new provincial restaurant meal tax in British Columbia while theindustry’s closest competitor [basic ood purchased at grocery stores] remains completely tax exempt.” Cndin restunts nd Fd asscitin

HoW DoES THE HST IMPaCT SErVICE

INDUSTrIES SUCH aS rESTaUraNTS?

Th rstaurant industry has said th HST

hits it hard. Whn rstaurants startd

charging th ull 12 pr cnt HST, rathr

than just th v pr cnt GST, many

rportd a dclin in customr sals.

Thr’s no doubt thr’s bn som pain

or individual stablishmnts. Howvr,

Statistics Canada data shows rom Jun

2010 to January 2011 ovrall industry

sals incrasd by about thr pr cnt in

both B.C. and all o Canada.

British Columbia’s rstaurant sals ar

actd by many conomic actors, rom th

halth o a local conomy, to vnts lik th

Vancouvr Wintr Olympics to th rputation

o th rstaurant and th ood and bvrags

on its mnu.

What is clar rom conomic data is that

whil som individual rstaurant’s sals

wr hurt by th HST’s introduction, th

sctor’s total rcipts hav trackd with th

national avrag sinc July.

arE oTHEr BUSINESSES HUrT BY

THE HST?Som businsss, lik banks, crdit unions

and rsidntial landlords rciv no rbats

or th HST thy pay on th things thy

nd to run thir businss or produc goods

and srvics. Just lik consumrs, ths

businsss ac incrasd costs bcaus o

th HST. This mans that thy must absorb

th addd HST costs or pass thm on to

thir customrs.

B.C.

Canada

90.0

2010 2011

J F M A M J J A S O N D J

95.0

100.0

105.0

110.0

115.0

FooD SErVICES & DrINkING ESTaBlISHMENT SalES

16




“I am the most worried about the perception o instability that it would create around our province i the tax decision were reversed...” Jdn Gdsby, Fmiy Ministy Pst & owne Netep Medi ltd

WoUlD GoING BaCk To THE PST/GST

DaMaGE oUr rEPUTaTIoN?

Businsss and invstors lik stability

and crtainty in th tax policis govrning

th marktplac.

That mans uncrtainty ovr utur dirctions

in taxation, such as a sals tax, is likly tohav at last a tmporary impact on businss

invstmnt. Qustions about what may or

may not b subjct to a sals tax could also

dlay th dcisions o consumrs in making a

major purchas, hurting rtailrs.

WHaT HaS BEEN THE oVErall IMPaCT

oF THE HST oN THE ECoNoMY So Far?

It will tak tim to assss th ral impact o

th HST on th conomy. To dat w can say:

•Business cnfdence hs emined stbe

•ove, BC husing stts hve

emined cnsistent with the

ntin vege

•The estunt industy epted swe

gwth when the HST ws intduced

But ve ses gwth hs etuned t

the ntin vege

Our consnsus is th HST will b a nt

bnt to th conomy. But you shouldn’t

xpct dramatic rsults ovrnight. It’s a taxthat ors incrmntal bnts ovr tim by:

•Ming mst businesses me

cmpetitive

•reducing dministtive csts t

businesses

•reducing the cst pducing gds

nd sevices

•Ceting me jbs

Consumer

Business

0.0

2010 2011

F M A M J J A S O N D J F

20.0

40.0

60.0

80.0

120.0

140.0

100.0

17

Source: Conference Board of Canada and CFIB

CoNSUMEr aND BUSINESS CoNFIDENCE



W can tll you this:

• Ging bc t the PST cn be dne —

just nt venight It wi te 18-24

mnths t g bc

•The fst ye ging bc t the PST/ GST wi esut in the pvince sing

me thn h--biin ds in evenue

Tht evenue gp wi incese ech ye

• Ging bc wi be epensive The

pvince wi pbby hve t epy

ottw the $16 biin it eceived t

tnsitin t the HST

• I the gvenment bwed $16

biin t epy ottw, it wud cst$85 miin ye in inteest bsed n

tdy’s inteest tes

•The gvenment wi spend $35 miin

ech ye t un new PST fce

•The pvince’s cnt ses t picy

wi emin gey the sme s it is nw

HoW loNG WIll IT TakE To Go BaCk?

No provinc has vr introducd th HST

and thn movd back to th PST. It can’t b

don quickly.

Th B.C. and dral govrnmnts nvrplannd or a rturn to th PST/GST systm

howvr, it is possibl to go back. Ocials

told us it will tak 18-24 months. That

includs rwriting dral-provincial tax

laws and rgulations, hiring back 300

tax collctors, rbuilding a provincial PST

oc and hlping businsss radjust thir

accounting systms.

IS GoVErNMENT raISING MorE MoNEY

UNDEr THE HST CoMParED To THE

PST/GST?

Ys. Th HST gnrats mor rvnu than

th PST/GST.

Whn th HST was introducd, th

govrnmnt xpctd in th rst yar th

xtra rvnus rom th HST would b

balancd out by tax braks and rbats.

That hasn’t happnd. Th HST is raising

mor rvnu in its rst yar than was

prdictd. With ach passing yar, th HST

will continu raising mor rvnu than

th PST/GST systm did bcaus it taxs a

broadr bas o goods and srvics.

I w go back to th PST/GST, th provinc

would s a sals tax rvnu loss o about

$820 million in th rst yar. That loss

would incras to $893 million in th

scond yar and would widn ach yar.

IMPlICaTIoNS oF GoING BaCk To THE PST/GST

W’v hard both sids o th argumnt around

th cost o going back to th PST/GST.

‘The HST is csh gb by gvenment With ste

pen the gvenment cn get id it, g bc t the PSTvenight, nd it wn’t cst dime’

‘The HST ises me mney pubic sevices Ging

bc wi te yes nd cete me debt’

18

“It took several months to fnalize the transitional rules beore the HST came into eect.We are concerned that it may take as much, i not more time, to develop transitional rules or removing the tax.” Ubn Devepment Institute




arE THErE oTHEr CoSTS oF GoING

BaCk To THE PST?

Ys.

I British Columbians dcid to go back to th

PST/GST, th B.C. govrnmnt would likly

hav to rpay th $1.6 billion that Ottawa

paid to hlp as B.C.’s shit to th HST.To pay or th rund, th B.C. govrnmnt

could borrow th $1.6 billion, cut spnding

or rais rvnu rom anothr sourc.

Borrowing th mony would cost taxpayrs

about $85 million a yar in intrst costs.

Anothr $15 million to $20 million in on

tim costs would nd to b spnt rbuilding

th PST tax oc and hiring back 300 tax

collctors and sta to collct PST again.Onc that’s don, it’s likly to cost about

$35 million a yar to run th PST tax

oc, administration costs now absorbd

by Ottawa.

arE THErE aNY SaVINGS For THE

GoVErNMENT IN GoING BaCk To THE

PST/GST?

Ys, thr ar savings to b had.

Th B.C. govrnmnt now pays HST rbats

to low-incom arnrs. Canclling thm

would rduc govrnmnt spnding by about

$232 million a yar.

Anothr $209 million would b savd

in th rst yar o going back i th

B.C. govrnmnt rvrss tax braks it

introducd to as consumrs into th

HST. That currntly givs vry taxpayr an

$80 tax brak.

So WHaT’S THE BoTToM lINE CoST To

THE GoVErNMENT oF GoING BaCk To

THE PST/GST?

Adding up th costs and th savings or

going back to th PST/GST, it mans

th provincial budgt would s a nt

rvnu loss o $531 million in th rst

yar and $645 million in th scond. That

trnd would continu ach yar, maning

othr rvnus would nd to b ound

or public srvics cut to avoid incrasing

utur dcits.

Going back to th PST/GST also has

consquncs or balancing th budgt.

Undr th currnt budgt plan, balancing

th provincial budgt would b dlayd by

at last on yar.

IMPaCT oF rETUrNING To PST/GST

19

“ . . . I do not think it is in the best interest o BC’ers to change back to PST/GST. First, because it would just cost we taxpayers more money to convert back and I don’t mean just businesses. We, the taxpayers, would have to pay or the bureaucracy to handle the paperwork to change back and also to rehire sta to handle PST again.” W Ngs, lngey

2013/14 2014/15

$ millions

Sals Tax Rvnu Loss 820 893

Rvnu Loss du toLowr economic Growth

32 80

Dbt Srvicing incras 85 85

PST Administration 35 35

Elimination of tax relief

HST Rbat -232 -232

Incom Tax Brak -209 -216

Net revenue lss 531 645




rEPorT SUMMarY

Th choic you ac on th HST and

PST/GST is a big on. It coms down

to balancing th savings you and your

amily will gt by going back to th PST

against th longr-trm conomic bntsthat staying with th HST will bring British

Columbians in th yars ahad.

Th immdiat impact o th HST on your

amily pocktbook is clar.

Unlss you ar among th 15 pr cnt o

amilis with an incom undr $10,000 a

yar, you’r paying mor sals tax undr th

HST than you would undr th PST/GST:

On avrag about $350 pr amily.And that dosn’t includ th HST you will

pay on occasional, big-tickt itms lik

buying a nwly built hous or putting on a

nw roo, which ar no longr xmpt rom

th PST.

I you vot to go back to th PST/GST,

all thos addd sals tax costs would

disappar. You will hav mor mony in

your pockt.That dcision, howvr, has longr trm

consquncs.

Going back to th PST/GST mans turning

away rom th gradual utur conomic

bnts xpctd with th HST. Thos

includ a simplr sals tax systm now

usd by mor than 140 othr countris

and a mor comptitiv conomy, whr

goods and srvics ar chapr to produc,boosting our xports, attracting invstmnt

and crating bttr-paying jobs.

Our panl acknowldgs it’s hard to put

concrt numbrs to ths utur bnts.

Howvr, our indpndnt analysis prdicts

staying with th HST will man a B.C.

conomy in 2020 that will:•B $2.5 billion largr than it would b

undr th PST. That’s about $480 pr

prson or $830 pr amily.

•Produc $1.2 billion mor in th xport o

goods and srvics.

•Crat an additional 24,400 bttr-paying

jobs.

In th contxt o a $200-billion conomy,

ths ar important—albit modst —bnts. But thy will mak B.C. mor

comptitiv in th global marktplac.

Your dcision also has srious ramications

or th provincial budgt.

Th HST taxs th growing part o our

conomy — srvics — and will provid

xtra rvnu to und hospitals, schools,

roads and othr important public srvics

you rly on. In contrast, moving back toth PST/GST will likly man runding th

dral govrnmnt $1.6 billion in transition

mony and, in th rst yar alon, put a

$531-million hol in th provincial budgt.

It’s not a simpl choic bor you. Our

indpndnt panl has givn you th bst

ovrviw w could to wigh th argumnts.

Now it’s your dcision.

21




JIM DINNING – CHaIr

Jim Dinning srvs as chair o th Canada

Wst Foundation and Wstrn FinancialGroup Inc. H is a chair and dirctor o a

numbr o public, privat and not or prot

companis and organizations. Until 2004,

Mr. Dinning was xcutiv vic prsidnt o

TransAlta Corporation. Prior to mid-1997,

h hld svral ky positions during his

11 yars as a mmbr o th lgislativ

assmbly in Albrta. O not is his srvic

as provincial trasurr rom 1992 to 1997.

Mr. Dinning is a graduat o Qun’sUnivrsity with two dgrs: a bachlor

o commrc in 1974 and a mastr’s in

public administration in 1977. H rcivd

an honorary doctor o laws dgr rom th

Univrsity o Calgary in 2002 and today,

srvs as chancllor o th Univrsity

o Calgary.

GEorGE MorFITT

Gorg Mortt is a graduat o th Univrsity

o British Columbia and a chartrdaccountant. Atr a 20-yar carr as chi

nancial ocr in th privat sctor in

Vancouvr, h srvd two trms as auditor

gnral o British Columbia. Mr. Mortt has

hld snior xcutiv positions in a numbr

o organizations, including: prsidnt, B.C.

Institut o Chartrd Accountants; chair,

Univrsitis Council o B.C.; and chair, UBC

Board o Govrnors. Mr. Mortt is a llow o

th B.C. Institut o Chartrd Accountantsand a Qun’s silvr and goldn jubil

mdalist. H currntly srvs as chair o

WorkSaBC and is a past dirctor o th

Motor Vhicl Sals Authority o B.C., th

B.C. Saty Authority and th Halth Council

o Canada. Mr. Mortt is an inductd

mmbr o th B.C. Sports Hall o Fam

and is past chair o Canadian Sport Cntr

Pacic. H currntly holds an appointmnt

as adjunct prossor at th Univrsity

o Victoria.

22

PaNEl MEMBErS



TraCY rEDIES

Tracy Rdis is th CeO o Coast Capital

Savings – Canada’s third-largst crditunion outsid o Qubc with ovr 400,000

mmbrs. Ms. Rdis is also a dirctor

o Cntral 1 Crdit Union. Sh has ovr

20 yars o xprinc in th intrnational

nancial srvics industry and holds a BA

(doubl major in conomics and Asian

studis) rom th Univrsity o Victoria and

an MSc in businss administration rom

th Univrsity o British Columbia. Hr

banking xprtis spans th industry – romcommrcial, prsonal, and privat banking

to -businss, IT, and invstmnt srvics.

Ms. Rdis is a dirctor o th CD How

Institut, th Vancouvr Board o Trad

and C.H.I.L.D. – a Canadian oundation

ddicatd to nding a cur or Crohn’s

disas, colitis and othr gastric illnsss in

childrn. Ms. Rdis has bn rcognizd

as on o Canada’s top 100 mal

businss xcutivs.

JoHN rICHarDS

John Richards is a prossor in th school

o public policy at Simon Frasr Univrsity.Traind as an conomist, Mr. Richards has

writtn xtnsivly on public policy mattrs

in Canada and is widly rcognizd or his

contributions to public policy dialogu on

social policy in Canada. Prossor Richards

holds th Rogr Phillips chair in social

policy at th CD How Institut and has

bn widly rcognizd as on o British

Columbia’s lading conomists. His currnt

social policy ocus is on Aboriginal policy.H co-dits Inroads, a Canadian policy

journal, and h has undrtakn taching and

rsarch intrnationally ovr th last dcad

H also hads a policy institut linkd to

th Intrnational Univrsity o Businss

Agricultur and Tchnology in Bangladsh.

Prossor Richards also srvd as an NDP

Mmbr o th Saskatchwan lgislatur

rom 1973-1975.

23



SUBMISSIoNS rECEIVEDBY THE INDEPENDENT PaNEl

Fu submissins cn be eviewed

nine t: wwwhstinbcc

itsyour decisionhstgstpst

Documents