The government has been rightly castigated for the unacceptable way in which it introduced the HST, but that does not automatically make it a bad tax.
Fundamentally, the harmonization transforms the old and messy GST/PST into a full value added tax (VAT), the kind now in place in many countries around the world, including all of Europe, because it is a very efficient tax that achieves the best outcome for the economy as a whole. It has also already been adopted by several other provinces.
The main disadvantage for the BC population is that the current HST applies to a greater number of items than covered by the GST/PST, so items such as haircuts, restaurant meals, renovations and tourism are more costly than before.
However, it should be noted that with the recently-announced phased reduction of the HST from 12 to 10 per cent, in future many goods and services will be taxed less than under the old system. Also, low income families and individuals will receive $230 each annually and everyone will receive a personal tax income tax reduction as well as a seven per cent credit on their utility bills for residential energy use.
As to the overall impact of the HST, the recent independent panel on the HST, stated that while the economic benefits had been somewhat overstated by government experts, it nonetheless concluded that: “Virtually all economic analysis finds the HST increases economic growth, productivity, wages and the quality of jobs.” The panel estimates the HST will generate a $1.2 billion increase in B.C. exports and a growth of 24,000 jobs over the next decade, not least because it will make B.C. a more attractive place for the investment needed to create long-term employment in small business enterprises as well as larger companies.
This will all be lost if the HST is rescinded. Moreover, going back to the GST/PST will be complicated, time consuming and costly if B.C. has to repay the $1.6 billion provided by the federal government for HST implementation.
The objective balance of the case weighs heavily in favour of maintaining the HST, especially given the recently announced improvements to offset earlier concerns. Indeed, we would be penalizing ourselves and future generations in BC if we dismiss the HST.