Finance minister gets roasted by restaurateurs
Finance Minister Colin Hansen delivers his pre-election budget in February, with no hint of a reversal of B.C. Liberal policy opposed to the harmonized sales tax.
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Updated: August 06, 2009 12:35 PM
For a pizza parlour, the main competitor isn't the one around the corner with a two-for-one delivery special.
It's the frozen pizza at the grocery store, which will gain a further price advantage when B.C. shifts to a harmonized sales tax next summer. That was the message delivered piping hot to Finance Minister Colin Hansen Wednesday by members of the Canadian Restaurant and Foodservices Association.
Mark von Schellwitz, the association's vice president for Western Canada, uses the pizza example to illustrate the problem.
"The difference is there is about a 10 per cent labour cost in the one you get from the grocery store," von Schellwitz said in an interview. "Meanwhile the little pizzaria is employing six people, it's got about a 35 per cent labour cost. The one at the grocery store you're getting for zero tax, and the one you're getting from the pizzaria is going to be a 12 per cent tax."
In what he described as "a pretty tough meeting" with Hansen in his Vancouver cabinet office, von Schellwitz served up a different delivery, nearly 1,000 faxes from restaurant owners blind-sided by the government's surprise announcement in July that it is harmonizing the provincial sales tax with the federal GST.
The new harmonized sales tax or HST will extend provincial sales tax not just to restaurants but a wide range of previously exempt services. It will also add seven per cent to utility bills, funerals, hair care, dry cleaning, real estate fees, movie tickets, accounting, photography, home care and domestic airline fares.
Hansen wasn't available for comment Wednesday. He has previously said he will not reverse the decision to harmonize sales taxes or create any exemptions beyond the ones already announced. Those include a partial rebate for motor fuels, which are subject to the escalating carbon tax as well as federal and provincial sales taxes. Books, children's clothing, child car seats, diapers and feminine hygiene products will be exempt from HST as they currently are from GST.
Hansen is expecting to have a hot summer of meetings with affected businesses who were led to believe the B.C. Liberals were opposed to harmonizing sales taxes.
Von Schellwitz pushed the point that restaurants still haven't recovered from the imposition of the GST in 1991, which gave prepared grocery store foods their first advantage.
"I think that sometimes people forget the fact that our industry is bigger than forestry, it's bigger than mining, it's bigger than construction, it's bigger than fishing, and it seems like there's a lot of empathy for those economic sectors but not for ours," he said.
It may already be too late for Hansen to offer restaurants or other affected industries a compensating tax break such as income tax in the provincial budget scheduled to be tabled in the legislature Sept. 1. Such changes could be made in a spring 2010 budget that would take effect before the HST does on July 1, 2010.
NDP finance critic Bruce Ralston said Wednesday that small businesses will also lose a commission that they were paid for collecting PST on behalf of the B.C. government. That could cost them up to $2,400 a year, he said.
Just last October, Premier Gordon Campbell announced an economic recovery plan that included doubling that PST commission, Ralston said.
"With small businesses and families across the province struggling to make ends meet, now is not the time to bring in a new tax, particularly without any consultation," he said.
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