BC government, Fight HST group clash over HST claims
By CO Staff @canadaone | April 5, 2011
Today the group Fight HST released a report, PST or GST? that included a countdown of the top 10 reasons why the PST is better than the HST for British Columbians. The BC governmment responded later in the day, criticizing the report for being laden with inaccuracies and misleading conclusions.
Where does the truth lie? We'll let you be the judge. Here are the arguments from both sides of the issue.
Fight HST Says: HST hurts families, seniors and low-income people most: 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.
The BC Government Responds: Under the HST, there is a B.C. HST credit of up to $230 per person annually. Low- and modest-income individuals, seniors and families that receive the B.C. HST Credit actually are generally better off with harmonization due to the credit.
Fight HST Says: HST is inflationary: To avoid a decrease in the standard of living, HST paid by consumers must be charged back to employers in the form of higher wages - ultimately wiping out any benefits to business. In Europe, the VAT started at about six per cent in most countries and has grown to as high as 25 per cent in places like Denmark, Hungary and Sweden.
The BC Government Responds: The Bank of Canada, TD Economics and economists have all said that harmonization will likely lead to a small one-time increase in the Consumer Price Index. A recent report by economist Jonathan Kesselman on the HST in B.C. suggested that the overall impact of the HST on the prices paid by consumers is very modest. The VAT in Europe being higher has much more to do with their higher level of spending on social programs and there is no relationship to higher inflation levels in those countries.
Fight HST Says: HST is economically counter-intuitive: B.C.'s big resource companies get most of their money from selling goods overseas and to the United States - which is new money coming in from consumers outside B.C. Exempting business from sales taxes means government is taking all of its sales tax revenues from consumers inside our economy, and then transferring $2 billion of it back to corporations mostly headquartered in Europe, Asia or the U.S. That doesn't make economic sense.
The BC Government Responds: In a globally competitive market place, the HST improves the competitiveness of B.C. businesses relative to foreign firms. The PST puts our manufacturers and exporters at a distinct disadvantage due to increased costs of production. The more competitive our industries are on a cost basis, the more jobs and investment will follow. As a trade- based economy, these improvements are real and explain why economists have predicted more jobs and growth as a result of the HST.
Fight HST Says: HST curbs consumption, reduces tax revenues and increases the tax burden: The HST in B.C. will take a total of $2 billion per year out of our economy - or an average of $400 more from every man, woman and child. Reduced consumption results in reduced government tax revenues. Governments must then either cut spending, increase debt, or raise taxes. Under the HST, they will end up doing all three.
The BC Government Responds: In fact, consumption has increased throughout 2010, as after the HST was introduced. Tax revenues are higher than forecast last year.
Fight HST Says: HST drives the economy underground: In 2009, the Institute for Fiscal Studies produced a report that showed "leakage" from VAT evasion in the UK of between $20 billion and $30 billion per year. When the HST is evaded, the government loses twice - the HST not charged, and the income not reported.
The BC Government Responds: Alleging businesses will break the law and in the process give up the input tax credits they would otherwise be able to claim makes no business sense. Given where HST revenues currently are, there is no evidence of 'leakage'.
Fight HST Says: HST kills jobs and hurts the economy: The provinces with the highest unemployment - Newfoundland 12.4 per cent, Nova Scotia 9.5 per cent, New Brunswick 9.1 per cent, B.C. 8.2 per cent and Ontario 8.1per cent - all have the HST. The three provinces with the lowest unemployment - Manitoba five per cent, Saskatchewan 5.4 per cent and Alberta 5.9 per cent do not have HST. If the HST really stimulated growth - then corporate income taxes would increase to offset lost sales taxes so consumers would not have to pay more HST.
The BC Government Responds: Low unemployment rates in Alberta and Saskatchewan are primarily due to the booming resource sectors in those provinces (oil and gas, potash), not to the lack of an HST.
Fight HST Says: HST is unnecessarily complicated: Under the HST, business accountants must track millions and millions of transactions and remittances, and file thousands of quarterly reports to government. But none of that is necessary. Simply exempting business from sales taxes would be a far simpler system than the cumbersome HST.
The BC Government Responds: The HST referendum, as determined by the HST petition, does not present another option for the PST system. The referendum will return B.C. to the PST as it was previously in place. In fact, the HST has simplified the tax system for businesses in British Columbia. B.C. businesses now only have to comply with one tax system instead of two, at an estimated savings of $150 million annually. In addition, most businesses were already familiar with the GST system.
Fight HST Says: HST is revenue-neutral to the B.C. government: One of the biggest myths surrounding the HST is that it will help to pay for government services such as health care and education. But the HST is really a $2 billion tax transfer from the corporate sector to the consumer with no new revenues going to government.
The BC Government Responds: The HST is not revenue-neutral going forward. The HST leads to improved economic growth and it actually provides increased revenues to government in the years ahead, revenues that will go towards meeting the demands of increasing health care costs.
Fight HST Says: HST is a loss of provincial sovereignty: The HST gives control of B.C.'s sales tax authority to the federal government. It turns B.C. into the equivalent of a giant municipality, awaiting transfers of our own money back from Ottawa.
The BC Government Responds: We can set our own tax rate, at 12 per cent the lowest in the country, select our own point-of-sale rebates such as the rebate for motor fuels, design our own B.C. HST credit for those with low and modest incomes, provide a new housing rebate and set the rebate percentages for school authorities, universities, public colleges, municipalities, hospital authorities, qualifying non-profit organizations and registered charities. B.C. retains the flexibility it requires in the tax system to respond fully to economic and social policy objectives.
Fight HST Says: HST threatens democracy: The B.C. Liberals want us to believe that repealing the HST will be too costly... and that's probably true - for them. A defeat of the HST in the referendum will change the way governments operate in B.C. forever. Never again will any government in B.C. be able to lie, obfuscate or deliberately cheat people out of their hard-earned tax dollars.
The BC Government Responds: All British Columbians will have the opportunity to vote on the HST in June. What could be more democratic than that?
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