Maybe it’s time to take a breather on this HST tax fiasco and look at it rationally. True, anything with the word ‘tax’ embedded in it has a vitriolic recoil mechanism. The Campbell government must have figured a) this would be a hard sell especially dumping it on us so soon after the election and b) this would be a clarion call for the post- election weary NDPs.

Starting July 1st, 2010, the existing provincial sales tax will be combined with the federal goods and services tax to create the harmonized sales tax. Consumers will pay the same tax percentages (5 per cent GST and 7 per cent PST) that they pay now for purchases but there will be fewer exemptions than currently exist under the PST system.

The PST was introduced in 1948 as a standard form of tax on consumer goods. It started as a tax on tangible things that could be held or consumed and there were plenty of exemptions. Over the years the tax expanded to include services. But the trouble with consumer taxes is that they have this cascading effect of accumulating along the supply chain from raw goods to finished product with the consumer picking up the final tab. The longer the daisy chain the more embedded taxes become.

The reorganization of consumer tax really caught the public’s attention/ire in 1991 with the launch of the hated GST. But the next year Quebec initiated its own value added tax. In 1997, New Brunswick, Newfoundland and Labrador, and Nova Scotia implemented the harmonized tax system. This summer Ontario decided to harmonize taxes starting July 1st 2010 when B.C. will launch its own HST.

Why? Greater efficiency. More administrative time savings therefore cost savings. Greater opportunities for business investment. Jobs. According to a report by Michael Smart, Research Fellow with the C.D. Howe Institute, investment in machinery and equipment rose 12.1 per cent in the harmonizing provinces after the 1997 sales tax reform.

“B.C. businesses will save about $150 million in costs,” said MLA John Les. “On top of that the government will save $30 million in administrative costs.”

Les stated that harmonizing the taxes will inject $1.6 billion in federal funds into the B.C. economy while boosting savings among key industries including about $880 million savings for the construction industry, $140 million each for the manufacturing and forestry sectors and $210 million for transportation.

While folks cry foul, some business associations support it including the B.C. Chamber of Commerce, B.C. Business Council, Canada West Foundation, Conference Board of Canada, Chartered Accountants of British Columbia, Canadian Manufacturers and Exporters and the BC Agriculture Council.

“This will have a significant and positive impact on agriculture overall, and is consistent with what our members have been calling for,” said BCAC Chair and Abbotsford turkey producer Garnet Etsell.

But what about Joe Sixpack who is still smarting for a retracting economy and nursing an allergy to anything taxable?

Under the new system, all those goods that are subject to GST will be subject to HST which will include a lot more goods and services. Things on which GST is not payable (groceries, prescription drugs and medical devices) will not be subject to HST. Point-of-sale rebates (similar to PST exemptions) will be levied on all fuels, children’s clothing, children’s car seats, booster seats, diapers, books, and feminine hygiene products. A rebate system on new housing purchases will be introduced as will an HST quarterly credit (similar to the GST credit and the carbon credit) for low income individuals.

Harmonizing taxes has caused a furore of disharmony. Campbell has a year to harmonize his idea of tax benefits with public acceptance.