The government’s decision to lower the provincial sales tax by half a per cent – effectively reversing a 2002 decision that raised the rate from seven per cent to seven-and-a-half per cent – was applauded by businesses across the province last week, including Whistler retailers.
According to Finance Minister Gary Collins, who announced the lower taxes on Wednesday, Oct. 20, the government had planned to roll back the provincial sales tax rate once the economy was on stable footing.
"Our plan to balance the budget and revitalize the economy is working and I am extremely pleased that we are now able to reduce the provincial sales tax," he said. "Since we made the difficult decision two and a half years ago to increase the rate to cover additional compensation for health care professionals, British Columbians have consistently and overwhelmingly told us that reducing the sales tax should be a top priority when the changes we were making began to pay dividends."
The half per cent tax reduction, which was effective on Oct. 21, will reduce provincial tax revenues by approximately $270-280 million a year.
For Retail B.C., an organization that represents more than 3,500 retailers in the province, the decision to lower taxes was a good start. Mark Startup, the president and CEO of the group, said the "B.C. Government has given British Columbians the gift that keeps on giving. Today’s sales tax cut will return $280 million into the hands of B.C. families this year and every year after."
Retail B.C. is calling on the government to further reduce the Social Service Tax in the next few years, aiming for a goal of "6 in /06", or six per cent by 2006, with further reductions every six months.
Retail B.C. believes that lower taxes will result in increased sales for its members. The organization also hopes it will reduce the number of British Columbians on border towns who are shopping for goods and services in Alberta, which does not currently have a provincial sales tax.
Reducing provincial taxes to six cents on the dollar will make B.C. retail taxes the lowest in the country, with the exception of Alberta and the Territories.
Stephen Henderson, the owner of Great Games and Toys in Whistler Marketplace and a Retail B.C. director, says the lower tax rate will make a difference for Whistler businesses.
"I think it’s going to definitely help," said Henderson, who says retail sales are down across Whistler. "I’m always surprised how many people notice the tax rate, and are sensitive to the rate. People do calculate the taxes in their heads, I’ve seen it many times in the store, and often that’s a factor in whether they choose to purchase something.
"High taxes hurt us."
Although it’s too early to tell what kind of effect lower taxes might have on retailers, Henderson says some of his customers have already noticed the change and have voiced their approval.
Not only will the lower tax rates benefit B.C. residents and retailers, Henderson says tax reductions will also make it easier to sell to Americans.
"The people who are most sensitive to our taxes are often visitors, because they’re not as familiar with our tax rates. They do think twice about purchases because of the tax rate," he added.
With the Canadian dollar currently at a 12-year high against the U.S. greenback, Henderson says the tax reduction will help Whistler and Whistler stores to remain affordable to visitors.
"I can’t explain it by from what I’ve seen, Americans are more sensitive to a half percentage change in the tax rate then they are to a five per cent change in the exchange rate," said Henderson.
"They know their dollar is still higher, even if they don’t know how much, but they also know that our tax rates are higher compared to say Washington… where it’s between eight per cent and 10 per cent, depending on where you live.
"When you let them know that they can get the GST back on purchases over $50 and they’re only paying seven per cent taxes, it does make it easier to see. The fact that there’s no taxes on items like books, children’s clothes or stationery and school supplies is also a help."
Henderson also believes that reducing the tax rate will make independent stores more competitive with the Internet, where consumers often get away without paying any provincial taxes.
"By lowering taxes, you take away one of the reasons many people shop online in the first place," Henderson said.
Whether the province will continue to lower taxes is not known, although Henderson says the current government is more aware of the challenges facing small businesses than the previous NDP government.
"It’s hard to say what they’re thinking, but we do know the government is aware of our position and is sympathetic to retailers. Anything’s possible, and we’re going to do our best to keep this issue front and centre," Henderson said.
Retail B.C. is focussed mainly on independent business, "mom and pop operations with a single store" but also counts companies like London Drugs among its members. Because smaller stores don’t have the purchasing power of the larger chains, lower taxes do make small businesses more competitive according to Henderson.
