Panel contends HST will bring benefit to business
British Columbia’s transition to a Harmonized Sales Tax will be a good thing for most Penticton businesses, according to the B.C. Chamber of Commerce.
Chairing a panel on the controversial new tax, Jon Garson, vice-president of policy development for the B.C. Chamber, said that the provincial chamber had been calling on the B.C. government to move to a value-added sales tax system, such as the HST, since 2002.
“In 2008, the members of that particular AGM asked us to make (advocating for the HST) a priority,” said Garson during Friday’s forum presented by the Penticton and Wine Country Chamber of Commerce.
“So, we went to government and said, ‘In terms of taxation policy, perhaps the single most important thing you can do for the B.C. economy is harmonize.”
Announced by the B.C. government July 23, the HST will combine the collection of the seven per cent Provincial Sales Tax with the five per cent federal Goods and Services Tax, mostly using the latter tax’s rules and collection infrastructure. The HST is scheduled for implementation in B.C. July 1, 2010.
The short-end of the tax shift is that many goods and services that were previously exempt from the PST but not the GST will be taxed an additional five per cent to the consumer at the time of purchase.
Garson said that many members of local chambers had been asking why the larger chamber supported the move. Friday’s panel discussion, he said, was meant to explain the B.C. chamber’s position.
“For the business community, the most important thing to bear in mind is that come July 21, 2010, with a few small exceptions, sales tax will disappear from the cost of operating your business,” said Garson, estimating the combined savings for B.C. businesses at slightly under $2 billion.
This is because the input tax credits businesses receive to recover the GST paid on purchases and expenses related to their commercial activities, will now also include the PST portion of the HST. In essence, it will be a seven per cent reduction in the amount of taxes most businesses pay on items and services that they use in their operations.
Another major reduction in costs for businesses, Garson said, would come because two tax systems will be harmonized into one.
“In terms of administration, the fact that B.C. businesses will only be dealing with one tax system, not two, means that the HST system will save businesses time and save businesses money,” he told the audience, the majority of whom were business owners.
“You will no longer have to collect and remit two taxes. And you will never be PST-audited again.”
Garson conceded the tax change, if not amended, would be particularly hard on four key sectors previously exempt from provincial consumption taxes: restaurants, tourism, new housing construction and the service sector, but that the B.C. chamber would like to work with leaders from those industries and the government to mitigate the negative affect of the tax.
He also recognized that the HST system’s shift away from taxing business inputs onto product consumption would increase the net price a consumer would have to pay on previously exempt products, raising two questions.
“By how much will prices go up and can the consumer absorb them?” asked Garson. However, he did say that he expects the overall price of goods and services in the province to drop as businesses pass the majority of their HST induced savings on to the consumer.
Garson addressed the timing of the B.C. government’s announcement to move to the HST, which came about two weeks after a provincial election, not to mention several years after rejecting the B.C. chamber’s 2002-recommendation to do so.
“It has been a consistent message from the provincial government not to harmonize. So, why are we harmonizing now?” asked Garson. “We are harmonizing now because the Ontario government is harmonizing.”
While the B.C. government’s July HST-announcement did follow an election, it also followed the Ontario provincial government’s March announcement to adopt an HST system. With Ontario now signed, Garson said, 90 per cent of the Canadian economy would be operating under a single value-added sales-tax system — with only Saskatchewan, Manitoba and Prince Edward Island not doing so.
“Whether in the pulp and paper, tech, mining or forestry industries, it will be extremely difficult for key sectors of B.C.’s economy to compete internationally if we don’t harmonize,” said Garson.
“Many people don’t recognize that our primary competitor for these key areas is actually Ontario and if we don’t harmonized we have by definition made ourselves a seven per cent more expensive jurisdiction for investment.”
Garson also pointed out that almost every other industrialized country in the world operates under such a tax system — for instance, 29 of the 30 nations in the Organization for Economic Co-operation and Development do so — with the U.S. being a major exception.
“As a chamber we tend to agree with the provincial government... overall, HST is a very positive initiative for the provincial economy.”
Friday’s panel also included: John Allan of the Council of Forest Industries; Peter Jeffrey from the Canadian Manufacturers and Exporters; Max Logan of the Retail Council of Canada; and Heather Weber, a tax specialist from Meyers Norris Penny. Each panelist spoke favorably regarding the affect the HST will have on B.C.’s economy from their respective industries’ perspective.
city@pentictonwesternnews.com
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