Local Politics General Liberal economic wizards manage to lose money on a hated tax grab
Liberal economic wizards manage to lose money on a hated tax grab
By Vaughn Palmer
When Finance Minister Colin Hansen announced the most recent set of breaks from the harmonized sales tax, he added that the provincial government had exhausted all of its room to move on HST relief.
"In terms of the rebate structure," he told reporters, "it is now done." In fact, the Liberals were more than done.
In the effort to minimize the impact of the much-hated tax, they have already given out more relief than they will collect in terms of revenue from the HST, thereby blowing a larger hole in a budget that was already in the red.
The story so far, according to the government's own budget documents and background papers: July 23, 2009: Premier Gordon Campbell joins Hansen in announcing that the seven-per-cent provincial sales tax will be combined with the five-per-cent federal goods and services tax to create a harmonized sales tax of 12 per cent.
Once the changeover occurs on July 1, 2010, British Columbians who've been paying five per cent for PST-exempt goods and services will be hit for 12 per cent.
At the same time, the B.C. Liberals announce the first in a series of relief measures that have the effect of reducing the amount that would otherwise flow to the provincial treasury from the changeover to the 12-percent HST.
Consumers will be given point-of-sale rebates on books, children's clothing, car seats, diapers, feminine hygiene products and motor vehicle fuel. Cost to the provincial treasury over a full year: $325 million.
There will be an outright exemption for new homes priced up to $400,000 and a flat rebate of $20,000 on higher-priced homes. Cost: $500 million.
To offset the additional sales tax bite on folks at lower income levels, about one million British Columbians will get an HST credit of $230 per year, paid quarterly. Cost: $227 million.
Sept. 1, 2009: As outrage grows over the HST, the Liberals table a revised provincial budget with additional relief.
The basic personal income tax credit is boosted to $11,000, creating a $72 break for individuals, $147 for those claiming a spouse. Another $173 million that the provincial treasury will never see.
Victoria will also provide full value rebates for municipalities, charities and non-profit organizations, ensuring they will pay no more after the HST comes in than they did before. Cost: $285 million.
Plus, the fuels rebate is extended to home heating oil and other sources of energy purchased for residential use. Cost: $210 million.
November 19, 2009: Hansen, responding to complaints that he had undershot the mark with the initial rebate for new-home purchases, raises the threshold to $525,000. Another $100 million bite from the provincial share of projected HST revenues.
January 14, 2010: Schools, hospitals, universities and public colleges will receive the same relief as municipalities, charities and non-profits. Cost: $230 million.
And that, as Hansen said at the time, is that.
Pulling all the various forms of relief together, the combined total is $2,050 million, which is to say just over $2 billion. Which is greater than the increase in revenues to the treasury when the province begins collecting its share of the HST with its expanded base of taxable goods and services.
The net impact, as of the September budget update, was reckoned to be a shortfall of $40 million. Throw in the November and January rebates, and the treasury will be shorter by $370 million over a full year.
This from a change that is widely denounced as a tax grab.
More properly, the HST is a tax shift. Consumers will pay more taxes for some goods and many services. Business, gaining inputs that were not previously available, will pay less, particularly for exports.
But thanks to all those B.C. Liberal-authored rebates and reductions, the treasury will reap less revenue -- $370 million less -- than if the HST had never been, making it unique in the annals of "tax grabs" and another unwitting tribute to the B.C. Liberals ham-handed ways on the fiscal front.
Mind, this accounting does not include Ottawa's one-time payment of $1.6 billion to ease the provincial "transition" to the brave new world of sales tax harmonization.
But the Liberals are using that money to reduce the deficit this year, next year and the year after, not to fund HST relief. Even with it, they face a struggle to meet their deficit targets.
For that reason, I doubt they will be offering further relief from the HST, despite pleas from the restaurant industry and others. Instead, look for them to proceed with the HST regime as announced, hoping to offer relief in 2012, when B.C. will be free to shave its currently locked-in rate by a point or two.
The only trouble with that scenario is the growing rumbling that Ottawa will be forced to raise its sales tax in order to balance the federal budget. Irony of ironies, if B.C. were to knock a point off its share of the HST only to have the relief clawed back by a one-point boost at the federal end.
Add this page to your favorite Social Bookmarking websites
| < Prev | Next > |
|---|
