Harmonized Sales Tax to drop two per cent 

Drop to be staggered up to 2014; corporate tax hike to accompany the drop

With a referendum looming on the controversial Harmonized Sales Tax, the B.C. Government announced several changes to the tax in a bid to make it more attractive to the public.

The most major change announced May 25 would see the HST rate drop from 12 per cent to 10 per cent, with a one per cent cut on July 1, 2012, and another one per cent drop on July 1, 2014. As well, families with children under 18 and low income seniors will get a one-time cheque at the end of this year, $175 for each child and $175 for seniors.

Although the province estimated that it would only cost the average family another $150 per year, an independent study recently found that the cost was closer to $350.

The HST was introduced on July 1, 2010, combining the General Sales Tax (GST) and Provincial Sales Tax (PST) into a single tax. The goal was to make it easier for businesses and eliminate the bureaucracy, double taxation and complications of dealing with two separate taxes, while also saving the province hundreds of millions in administration costs.

The drawback was that the combined tax raised the price of products and services that were previously exempt from the GST or PST, such as restaurant bills, new home sales and bicycles. The backlash resulted in a petition, which forced a provincial referendum on the tax to take place on June 24.

In addition to the reduced rate and one-time rebate, the province announced that they would raise the corporate tax income from 10 to 12 per cent to make up the difference, and increase tobacco taxes. The province also indefinitely postponed the reduction of the small business tax rate to zero, which would have kicked in April 1, 2012.

While the majority of British Columbians are opposed to the HST, public anger is cooling as the province and businesses have discussed the benefits. As well, the province has made it clear that taxpayers could be on the hook for up to $2.3 billion in the next three years if the HST is scrapped and the GST/PST system restored.



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