June 11, 2010 Features & Images » Feature Story

The HST Monster 

Harmonization and its Discontents

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Jimmy went to the hardware store to buy himself a gasket. A dishwasher had broken back home and he needed the parts to fix it.

Walking into the store, he knew he'd be confronting a monster through the simple act of purchasing a product - the Provincial Sales Tax, or PST, which would add seven per cent to the cost of his purchase.

It was a rather discriminate creature, subsisting off the organs of the economy by latching on to certain purchases. In the hardware store it applied to just about every item except the candies at the counter.

But while Jimmy knew he'd be feeding this little monster through the tax on top of his purchase, he didn't know he'd actually be feeding it twice because the same tax had also burrowed itself into the shelf price of the products. Almost every item had been taxed twice.

To cover that cost each product in the store was priced three to four per cent higher. That helped the storeowner cover the PST he paid on the expenses he needed to keep the store running. That included his counter, light fixtures, computer and shelves.

Jimmy picked up a gasket from aisle three and walked to the cashier. The man at the till smirked as he approached. He paid $17.99 plus $2.15 in taxes on top of it. He also forked over another $0.72 - an extra four per cent hidden within the shelf price that he didn't even know he paid.

 

The coming of the HST

What's described above is a situation that the provincial government hopes to eradicate through implementation of the Harmonized Sales Tax (HST). Starting July 1 the HST will merge the rates of the GST and the PST into a single, recoverable, value-added tax (VAT) that will apply to almost all purchases. Businesses can recover the tax by charging it to consumers.

The B.C. Liberal government sells it as the "single biggest thing" that the province can adopt to stimulate its economy and almost no one is convinced. A petition to stop the tax has allegedly reached the threshold of 10 per cent of the voters in every riding it needs to prompt a review and, possibly, a referendum on its implementation.

Many worry about the expenses that will be added to many of their purchases; like any monster, they fear something they don't understand.

Real knowledge of the tax is generally confined to people with backgrounds in accounting, tax law and economics, at least if one wants to explain how the tax will be beneficial. There is a case to be made, but the complicated nature of the new tax system and the one it's succeeding make it difficult for the government to explain precisely how.

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