The news has been out there for a while now that British Columbia was considering a harmonized sales tax. If there is a bad idea BC hasn’t tried yet, it just means we haven’t heard of it before! I think Ontario is considering the same but that’s of little concern to anyone here.
There are a lot of arguments in favour of the HST, most of which fall around “simplifying” things for the retailers. Here’s how difficult it is: some things get charged provincial sales tax and some don’t. THIS IS WAY TOO COMPLICATED! Instead, all of those exempted goods and services are now no longer exempt, because instead of falling under the jurisdiction of either the federal or provincial taxation, they are subject to both. This is how you get away with calling it a “harmonization” instead of a “hike.”
The largest costs to people will be those trying to buy a new home:
Builders and consumer groups say B.C.’s new harmonized sales tax is a “disaster” that will add $36,000 to the cost of a new $800,000 home.
Opposition is building to the province’s plans to add a seven-per-cent levy on goods and services that had been exempt from provincial tax.
“My own company just survived one of the worst recessions in a long time. I would think twice about paying an extra $36,000 house tax,” Bob Dominick, vice-president of WestStone Properties, said Sunday.
There is something to consider–the redistributive nature of governement, who are actually offereing a tax rebate, as long as you remember to claim it:
Taking the rebate into consideration, the actual increase in tax on new homes will be two per cent on the first $400,000 and seven per cent thereafter.
The Real Estate Board of Greater Vancouver has the averge price of a home at $489,007 for last year. That makes almost $15,000 on a new home if it’s the average price. But not to worry, as the price of the home will be dropping before you know it when the tax savings for construction companies will be passed onto customers. So in essence the government has instantaneously set the taxes higher but the price reduction has to be “phased in” by private industry when they eventually get costs down.
How’s the tax savings going for you construction guys so far? After all, now you have a new carbon tax to contend with:
That is why the B.C. Government is taking action. On July 1, 2009 the revenue neutral tax on carbon emissions increased by $5 per tonne, which will result in an increase of 1.17 cents per litre on gasoline. By law, government must show how all of the carbon tax revenue flows back to individuals and businesses as tax reductions.
Now, do you think that construction companies and manufacturers have to use trucks? Do lumber producers have to cut down a tree now and then? The government is already taking a nice juicy chunk out of them but offering them eventual tax realizations. However, if too many people just aren’t going to venture out and buy a new home, how will this translate into any savings? Making the sale is the first point of contact for new homes, not the last. The BC government has the tax incentive problem completely backwards.
If you want to make the tax system less complicated, eliminate certain taxes and make an overall reduction. Eventually you might find the tax rate that will cause revenue to drop faster than economic growth can supply. Don’t count on the Liberals to cut corporate taxes when faced with a “budget crisis”, either. Here are some of the unrealistic goals for this new tax structure:
It’s estimated the HST will remove over $2 billion in costs for B.C. businesses. That includes an estimated $1.9 billion of sales tax removed from business inputs, which enhances competitiveness, increases investment and productivity and, ultimately, increases prosperity.
Right, but the total revenue for all sales tax is roughly $5 billion, so if they are really able to trim another $2 billion in waste from that system, the tax code must be absolutely broken. You can even see from the budget here that the government actually counts exemptions from the sales tax as costs!
Premier Campbell promised no HST before the election, which in retrospect was brilliant because no one would have elected him on a shift-and-hike tax scheme.