Policy & Positions Manual
Policy Priority Area - Competitive Taxation and Regulation
HST Policy (2010)
The Chamber believes that British Columbia needs to continue to attract new investment and ensure that its small businesses are as competitive as possible as they strive to market goods and services to the consumer. Consequently, the Chamber has consistently called for the Provincial and Federal Governments to harmonize the Provincial Sales Tax with the Federal Goods and Services Tax as a critical mechanism to reduce the marginal effective tax rate applied on business investment.
Equally, the Chamber has supported changes that would eliminate the $1.9 billion in tax costs on intermediate and capital goods and services. The Chamber has also supported changes that would reduce the compliance costs that proportionately burden small-businesses.
Removing the PST businesses pay will reduce costs and allow businesses to expand, create jobs in their community and make capital investments to improve product delivery.
British Columbia is falling behind internationally using an antiquated retails sales tax in the PST. By reducing the costs to BC businesses, the HST will be essential to maintaining their competitiveness both domestically and on the world stage.
Noted economist Dr. Jack Mintz recently concluded:
“By 2020, the combined effect of federal and provincial corporate tax cuts and sales tax harmonization is expected to increase the province’s capital stock by more than $14.4 billion and add 141,000 new jobs. Sales tax harmonization alone will account for an increase of $11.5 billion in capital investment and a net increase of 113,000 jobs by the end of the coming decade.”
There is no disagreement; all analysts (even many opponents) recognise the fact that the HST in BC will mean a stronger economy, more jobs, and higher incomes over time. Indeed, the Chamber believes this raises a critical question for those that oppose the introduction of the HST: how would you achieve the outcomes of HST while keeping the current inefficient and ineffective PST?
Despite these benefits legitimate concerns remain in certain sectors of the business community. Certain products and services, such as restaurant services, which have enjoyed tax breaks under the current PST system, will see their tax-rates rise to 12% from its current 5%.
While these businesses will save money through increased ITC’s and the removal of embedded PST the cost structure of these businesses are such that these savings are unlikely to offset the need to increase the sales tax charged to their customers. This has led to the very real concern that where demand is elastic, any increase in the cost to a consumer may dissuade these consumers patronizing a business, or may erode the profit margin for an impacted small business if they feel they cannot fully pass on the cost to customers.
The potential for a negative impact to certain sectors means that, as with all taxes, the Chamber believes government has a duty to continue to review the impact of tax across the economy and make adjustments where a negative and potentially harmful impact can be demonstrated. This will be particularly important in the case of the HST.
We need economic policies that enable BC employers to create jobs, increase investment and enhance productivity. The HST will give BC export industries the competitive edge they need in the new world economy, and Government must ensure that the benefits are felt by the service and domestic sector as well.
THE CHAMBER RECOMMENDS
The Provincial Government:
- review the impact of the HST and continue to consult with businesses, particularly those from adversely impacted sectors, in order to mitigate any negative effects of the HST; and
- introduce targeted transitional assistance for business sectors that are adversely impacted by the added HST cost.
