Re: Making the case for the HST, Tom Fletcher, BC Views

It is true that certain types of machinery and equipment used in certain industries are exempt from PST, but this covers only a portion of overall business purchases of the many different types of assets that fall under the broad heading of machinery and equipment. For example, none of the machinery, equipment, computers, printers etc. used in any service business in the province is covered by the exemption. So it’s not the case that “most” business purchases of machinery and equipment are tax-exempt today, although some clearly are.

That said, the more important point here is that businesses in B.C. today pay roughly $2 billion in PST every year on a host of different inputs which they must purchase in order to produce goods and services and maintain their operations; such inputs include not just machinery and equipment, but office supplies, vehicles, legal services, furniture, parts, construction materials, and energy. In all, some 40 per cent of the total PST revenue collected by the B.C. government comes from tax on business inputs. Because of this, the PST really amounts to a “hybrid” sales tax, in that it falls partly on production and partly on final consumption. The part that falls on production raises the cost of doing business in B.C., discourages non-residential business investment, and detracts from the competitiveness of B.C. firms that produce and sell tradable goods and services.

None of this is to say that the HST is perfect or that some folks don’t have legitimate concerns about the government’s proposal. At the margin, it is clear that the HST will increase the tax-inclusive prices of some services that consumers purchase in the local market. In a few sectors, the HST may lead to a decrease in consumer demand for particular services (restaurant meals, haircuts), although frankly the evidence from Quebec and Atlantic Canada, where HST type taxes have been in place for a decade or more, suggests that any such effect is likely to be quite small.

Jock Finlayson

Business Council

of British Columbia