The HST conundrum

Rarely has there been a looming issue of such significance as the HST referendum, to be held in June.

Barely had the last election been decided, when the government announced an agreement with the federal government to move  to a 12 per cent HST effective July 1, 2010.

A negative public reaction, focused primarily on the timing and manner of the announcement, followed. This allowed former Premier Bill Vander Zalm to lead an HST Initiative Petition process. The initiative succeeded in all of BC’s 85 ridings. This led directly to the scheduling of a province-wide referendum.

It’s unfortunate that a poor explanation and introduction of the HST has led to a situation where the citizens of BC will make a major tax-policy decision with long-term ramifications. Many will argue that this is democracy in action. But is it really? One would think that democracy is served by our election of a government charged with making necessary, and at times unpopular decisions, particularly when dealing with taxation issues.

Had we had referenda to decide on past tax increases, there is little doubt that most, if not all would have been turned down by voters. This would have resulted in a crisis in the delivery of services which would have made our present challenges pale by comparison. It’s illogical to expect citizens of any jurisdiction to vote enthusiastically in favour of a tax increase, even when it can be shown to produce long-term benefits.

If this is an accurate reading of the public mood with respect to the HST issue as it presently stands, it is destined to be voted down.

It can be argued that a loss of the $230 annual HST rebate to low-income citizens will be offset by a return to the old GST and PST. However, the repayment of $1.6 billion to the federal government, of the transitional funding received, has negative repercussions. The world-wide recession of 2008/09 forced BC, like most governments everywhere, into a major deficit which will take several years to eliminate.

Perhaps more important is that reversing the HST would put all our industries at a competitive disadvantage with four other provinces, particularly Ontario, which also introduced the HST in 2010. This loss of competitiveness would inevitably translate into the long-term loss of jobs.

We have to recognize that in order to sustain our ability to deliver the quality services we demand, taxes are a necessary evil. The only way to moderate taxes on the individual is to preserve and enhance competitiveness of our industries. The HST is critical to that end.

Despite the poor way it was introduced, I’ll be voting in favour of retaining the HST. I believe the HST to be good tax policy, necessary to maintaining our province’s competitiveness, while maintaining needed services for its citizens.

With only three months to convince more than 50 per cent of the voting public to preserve the HST, what can the government do to have a chance of winning the referendum?

A commitment to reduce the HST by one per cent, to 11 per cent, as well as an HST exemption for the hospitality sector, just might win the day.

It’s an unfortunate reality that we want to see immediate benefits in our own pocket before voting in favour of good tax policy. But that’s what happens when government stumbles itself into a position where individual citizens are being asked to vote in favour of what they perceive to be another tax burden.

The BC Government needs to take decisive action to convince its citizens to vote on the merits of an HST system, rather than on the manner of its poor initial introduction.

Peter Dolezal is the author of three books.