Is the HST really bad for us?

Disclaimer: The opinions expressed in this article reflect only those of the author and not necessarily of SFU Volunteer Services.

Opposition against the Harmonized Sales Tax (HST) in British Columbia (BC) has been growing the past couple of months. According to the CBC, organizers claim that over 500,000 have already signed the anti-HST petition.  As per the same article, the petition requires enough signatures from only 13 ridings now in order to trigger a province-wide vote on the switch to the HST tax system.

Picture taken from the Government of BC website

You may have been one of the many who have already signed this petition. If you haven’t yet, you’re likely thinking about supporting it given all the negative press that this new tax system has received. But have you already thought about the issue? And by that, I mean really thought about the issue? I’m wondering because it seems like whenever we hear the word “tax”, our default reaction is to oppose it.

Case in point: the Carbon tax which was also imposed by the BC Liberals in 2008. Initially, the NDP and a number of vocal citizens opposed it despite the fact that environmentalists praised the move. Although opposition against the Carbon tax never gained momentum (at least not in the same level that HST opposition has come up to), my point here is that we seem to take a knee-jerk reaction against any changes to our tax system regardless of how those changes might in fact benefit us.

Support for the HST, although minimal, has been mostly about the elimination of the Provincial Sales Tax (PST) which, to paraphrase what some economists have said, is an inferior tax system.

According to a column written by Jonathan R. Kesselman, a professor at SFU’s Public Policy Program, the move towards HST and the elimination of the PST “will improve tax simplicity, economic efficiency and equity.”

In an article written by Kesselman for the Vancouver Sun, he challenges HST opponents to take a closer look at the tax system that they are defending – the PST. He points out the oddity and the costs associated with the current system:

[N]o country besides Canada simultaneously employs two such divergent forms of sales tax at the national and sub-national levels. Retention of the PST in B.C. would leave the province’s businesses with an unnecessary $150 million of tax compliance costs each year, which push up product prices for all consumers. Retaining the PST would also leave the provincial government burdened with annual costs of $30 million for administration plus $50 million for vendor compensation.

Kesselman isn’t alone with this perspective. According to a column that appeared in The Tyee, two UBC professors support the HST. In fact, one of them, Professor Kevin Milligan from the Department of Economics in UBC, calls it “a good policy.”

Calyn Shaw, the author of the said article, brings some more clarity regarding the PST vs. HST debate:

What seems to be lost in the HST argument, however, is that in the long-run, switching to a value-added tax instead of a retail sales tax is hugely beneficial to consumers. The current PST is an embedded cost in most of the good and services we purchase. Just because we don’t see PST on the receipt doesn’t mean we didn’t pay it. Businesses paid the PST and passed it right on to us as consumers. What is worse is that the current PST is a cascading tax, which means that often the embedded PST was paid multiple times depending on the supply chain of the goods B.C. consumers are often paying double or even triple PST as an embedded cost without even knowing it.

Shaw, in the same article, points out that the new tax policy introduced by the BC Liberals includes tax credits for low earners, rebates and exemptions.

Interestingly, the HST has support from key business associations in BC. The Council of Forest Industries, the BC Chamber of Commerce and New Media BC, among others, released a statement fully supporting the new tax system:

While the PST is often viewed as a “consumption” tax, in fact it applies to both consumption and production. Approximately 40% of PST revenue is paid by businesses on goods and services which they purchase to run their operations – everything from equipment, machinery, vehicles, and building materials to office supplies, furniture, energy, legal services and more. As this PST-related tax burden is removed, the vast majority of businesses will be in a better position to invest, to grow, and to sustain and create jobs.

Picture taken from the NDP website

Just to be perfectly clear – my intention with this article is not to solicit support the HST; frankly, I’m not sure yet whether I support it or not. I do not mention any of the points made against HST because those have already garnered wide media coverage.

My intention with this article is to encourage you to think twice about the issue before forming an opinion. Before signing that petition, think about whether you’ve truly understood the issues behind it. Research both sides of the issue – by taking the following actions, for example:

- Talk to an Economics, a Business, or a Public Policy professor who can provide you with an academic or theoretical background regarding the issue.
- Read what the NDP is saying about the HST, but don’t forget about what the Government of BC is saying, too.
- Check out or visit the No BC HST Facebook page. To get balanced information regarding the issue, read what business associations are saying about the HST also.
- Visit The Tyee, an online magazine covering BC issues, for more independent coverage of the issue.
- Contact your local MLA. You might want to contact an MLA from a different provincial party to get a balanced viewpoint.

As university students, we are taught to become better critical thinkers. At SFU, we’re also encouraged to be engaged citizens. As our province faces a possible move towards a new tax system, there has never been a better time for us to walk the walk.

By Kelvin Claveria