April 1 end of the HST draws divided response

As the PST/GST officially replaces the HST on April 1, Chilliwack residents remain divided on the issue.

Despite the fury with which people initially rejected the HST, many came around by the time of the referendum. Chilliwack voted to keep the tax by extremely thin margins. Chilliwack MLA John Les believes the referendum would again fail if introduced now. As Chilliwack prepares to return to the PST/GST system come April 1, some are lamenting the provincial public’s hasty decision to extinguish the tax. Others stand firm that the “Hated Sales Tax” won’t be missed.

The opposition began when former BC Liberals Premier Gordon Campbell introduced the tax in July 2009, two months after his re-election. This shocked voters, as the tax visibly shifted the burden of taxation from businesses, onto consumers.

“It collects the tax at a different place in the economic chain of events. It collects it at the retail end, as opposed to collecting it during the process of production,” says Chilliwack Liberal MLA John Les.

While the tax rate on most goods and services remained the same, consumers buying restaurant meals, tobacco products, gym memberships, over-the-counter medications, and other items, had to pay an additional five per cent tax.

The government argued that the HST created economic growth by making taxation more efficient, that extra income would fund social services, and that businesses would pass on their savings to consumers in the form of lower prices.

Countering, the Fight HST lobby group argued that “The HST is a regressive tax that forces middle and lower income people to pay a greater proportion of their income to acquire the same goods and services as those with higher incomes. The HST hurts poor people the most.”

Although people in the City of Chilliwack voted to keep the HST, they were profoundly divided on the issue. In the Chilliwack riding, 49 per cent voted to reinstate the PST/GST. In Chilliwack-Hope, that margin was less than one per cent, with only 127 votes tipping the scale. Provincially, 55% voted to repeal the HST.

“The government claimed it would be revenue neutral, but the claims were kind of hazy. I don’t think the public believed it,” says Vladimir Dvoracek, head of the economics department at the University of the Fraser Valley.

An independent report found that households paid an average of $350 more annually under the HST. After taking into account HST rebates and tax breaks, families paid $1.33 billion more in sales tax.

“The first year the HST was introduced, sales tax revenue went up 17 per cent,” says Dvoracek.

Most agree that the “broad-based” HST is simpler and more efficient because it taxed everything at one level. It was easier for businesses to file accounts to only one agency, and it was easier to administer for government.

The business community also believes that the HST was not around long enough for consumers to feel the full benefits.

“We know that HST is better for business in that HST, in its whole 12 percentage, is rebated back to the business on expenses related to the business,” says Keven Gemmell, president of the Chilliwack Chamber of Commerce. “It allows us to pass on savings to the consumer at the end of the day because we don’t have to pay the seven per cent provincial portion as an expense to our business.”

But Dvoracek is skeptical that the price of goods fell as a result of the HST. Businesses were largely exempt from PST already, he says, and HST provided further exemptions only to some businesses.

“There was a reduction on tax on business, and an increase on tax on person. That is true, but businesses aren’t going to remit all their cost savings to consumers. There’s nothing in economic theory that says that,” says Dvoracek.

This especially applied to businesses that did not paying tax on raw business goods, such as purchasing food to prepare at a restaurant, but later charging tax on the product to customers.

“It is directly hurting our business,” says Bravo Restaurant & Lounge owner Louie De Jaeger. “Specifically, when you didn’t have a tax on food, you put a tax on food, that directly hurts people who are selling food.”

At least in the restaurant industry, De Jaeger does not believe that businesses pass HST savings onto consumers.

Voters threw out the HST in an uncharacteristic fast and powerful sweep within two years. Campbell also resigned, and the Liberals’ approval rating going into the May 2013 election is lower than that of the NDP.

“It’s a place where real democracy worked. I never thought that there could be a recall on this, and there is. It shows that when something is brought in that people don’t like, there is a mechanism to kick it out,” says Dvoracek.

But Liberal MLA Les sees it differently.

“Political referendums are a brutal method to use to establish economic policy. We’ve learned that lesson to our eternal detriment,” he says. “I will always regret that the HST is not going to be permanent.”

The switch between two taxation systems in four years has cost business owners untold dollars, and countless headaches. B. C. also has to return $1.6 billion to the federal government, which it had received as incentive to transition to HST.

For Royal Hotel operator Leonard Wiens, the cumbersome, doubled transition process requires staff retraining. Although the HST is simple, jumping back and forth is not. The fact that tax on hotel rooms decreased by nearly one per cent under the HST was a minor benefit, says Wiens.

Businesses that sell or lease taxable goods must register for a new PST number by April 1, 2013, even if they have an old one. The government will continue to conduct free online seminars about the transition throughout April.

akonevski@theprogress.com
twitter.com/alinakonevski

 

Just Posted

Chilliwack’s Jordyn Huitema, a member of the Canadian national women’s soccer squad.
Another scoreless draw for Chilliwack’s Jordyn Huitema and Canadian national women’s soccer squad

Canada played Brazil to a 0-0 tie days after doing the same in a friendly against the Czech Republic

FVRD surveyed public opinion on cannabis production and processing in the electoral areas. Odour and distance from residential areas were the top concerns. (Black Press file)
Cannabis production and processing rules being drafted by Fraser Valley Regional District

Data from public opinion survey will be used to guide cannabis-related land use

Robert Nelson, 35, died after being stabbed at a homeless camp in Abbotsford on April 7 of this year.
Mom pleads for information about son’s killing at Abbotsford homeless camp

Robert Nelson, 35, described as ‘man who stood for justice, honour, respect’

Chilliwack firefighters watch as an O’Connor Towing operator removes a stolen Volkswagen station wagon from the Fraser River off Cannor Road in west Chilliwack on June 13, 2021. (William Snow photo)
PHOTOS: Stolen vehicle dumped in Fraser River in Chilliwack Sunday

Search and Rescue determined there was no one inside the car found upside down off Cannor Road

Police arrest the suspect in an attempted armed bank robbery on June 2 at the Scotiabank at Gladwin Road and South Fraser Way in Abbotsford. (Photo by Garry Amyot)
Abbotsford bank robbery suspect who was stopped by customers faces more charges

Neil Simpson now faces total of eight charges, up from the initial two

Canadian Prime Minister Justin Trudeau participates in a plenary session at the G7 Summit in Carbis Bay, England on Friday June 11, 2021. THE CANADIAN PRESS/Adrian Wyld
Canada donating 13M surplus COVID-19 vaccine doses to poor countries

Trudeau says the government will pay for 87 million shots to be distributed to poor countries

Kelowna-Lake Country MLA Norm Letnick, assistant deputy speaker at the B.C. legislature, presides over committee discussions. The legislature is completing its delayed spring session this week, with most MLAs participating by video conference. (Hansard TV)
B.C.’s daily COVID-19 infections dip below 100 over weekend

Only 68 new cases recorded Monday, four additional deaths

The BC Ferries website went down for a short while Monday morning following a provincial announcement that recreational travel between health authorities can resume Tuesday. (Black Press Media file photo)
BC Ferries’ website crashes in wake of provincial reopening announcement

Website back up now, recreational travel between health regions to resume as of Tuesday

The Kamloops Indian Residential School is photographed using a drone in Kamloops, B.C., Monday, June, 14, 2021. The remains of 215 children were discovered buried near the former school earlier this month. THE CANADIAN PRESS/Jonathan Hayward
Communities grapple with what to do with former residential and day schools

Some tear them down as a tool to help healing, others repurpose them as tools for moving forward

Cannabis bought in British Columbia (Ashley Wadhwani/Black Press Media)
Is it time to start thinking about greener ways to package cannabis?

Packaging suppliers are still figuring eco-friendly and affordable packaging options that fit the mandates of Cannabis Regulations

FILE – Provincial health officer Dr. Bonnie Henry talks about B.C.’s plan to restart the province during a press conference at Legislature in Victoria, Tuesday, May 25, 2021. THE CANADIAN PRESS/Chad Hipolito
B.C. watching U.K.’s COVID struggles but don’t think province will see similar pitfalls

Studies show that one dose of vaccine is only 33 per cent effective in preventing B.1.617.2 spread

RCMP Const. Shelby Patton is shown in this undated handout photo. RCMP say that Patton was hit by an allegedly stolen truck that he had pulled over on Saturday morning in Wolseley, east of Regina. THE CANADIAN PRESS/HO, RCMP
Pair charged in Saskatchewan Mountie’s death make first court appearance

Const. Shelby Patton was hit by an allegedly stolen truck that he had pulled over Saturday morning

David and Collet Stephan leave for a break during an appeal hearing in Calgary on Thursday, March 9, 2017. THE CANADIAN PRESS/Todd Korol
Appeal Court rejects stay for Alberta couple facing third trial in son’s death

Pair accused in their earlier trials of not seeking medical attention for their son sooner

Highway notices like this come down effective June 14. Public health restrictions on non-essential travel and commercial operation have hit local businesses in every corner of B.C. (B.C. government)
Province-wide travel back on in B.C.’s COVID-19 restart plan

Gathering changes include up to 50 people for outdoor events

Most Read