British Columbia’s defeat of the harmonized sales tax (HST) in a referendum is an indication that some level of democracy is alive and well in the province. I suppose overthrowing a tax by referendum is also preferable to overthrowing it – and the government – by way of bloody revolution, as we’re seeing in other countries this year.
Was it a collective act of shooting yourself in the foot to stop the pain in your arm? Yes. But the voters have spoken and the HST will be gone in two years.
I cannot think of a public policy initiative in modern Canadian history that was more poorly implemented, more poorly sold and more poorly managed than the introduction of the HST in B.C. It will be in public administration and political science textbooks around the world for generations to come as an example of “how not to do it.” The chapter will be called Amateur Hour. Maybe someone will turn it into a musical called Send in the Clowns.
To help with the research, here are a few things the Liberal government did wrong, as well as my thoughts on what could happen now that B.C. will have to find a way to reverse the benefits of the tax, hire tax collectors on the provincial payroll, and pay Ottawa back the $1.6-billion sent to the province for transition costs to switch to HST.
This is a huge problem. The agreement between Ottawa and B.C. spells out that not only will the $1.6-billion have to be repaid, it's payable 180 days after Ottawa gives the province notice of a “material breach.” This means that if the federal government gives notice on Sept. 1, 2011, the money will be payable on March 1, 2012.
If it's not repaid, Ottawa can set-off against the weekly HST payments it makes to B.C. under the agreement.
The blame for this disaster clearly rests with the provincial Liberals.
First, the HST was introduced immediately after an election it wasn’t campaigned on, and this outraged many citizens, especially former premier Bill Vander Zalm, who became a lightning rod for outraged voters who thought they had been lied to (which arguably they had).
The premier at the time, Gordon Campbell, allowed himself and the HST to be defined by Mr. Vander Zalm who, to be blunt, made questionable statements to the public about the effect of the tax at every opportunity. Whether he didn’t like the perception that Ontario and Quebec politicians would now “control” a tax that had been within provincial jurisdiction, or that he didn’t really understand value-added taxes such as the HST, I can’t say. As for the latter, Jason Myers of the Canadian Manufacturers and Exporters Association informed me of a meeting he was at where Mr. Vander Zalm was speaking. When asked what sort of sales tax he would favour if he didn’t like the HST, Mr. Vander Zalm said to the group: “A VAT applied across the board.”
There was a profound lack of leadership on the issue that doomed the referendum from the get-go, both on the part of Mr. Campbell and his successor, current Premier Christy Clark. Rather than go head to head with Mr. Vander Zalm in the town halls of B.C. to better explain the tax, or to correct Mr. Vander Zalm’s math, or to remind younger voters that he instigated the Property Purchase Tax that added thousands of dollars to the purchase price of homes in B.C., the provincial Liberals lost Mr. Campbell (who resigned as a result of the public outrage), and also lost control of the message. They distanced themselves from the debate as if the HST were an alcoholic aunt that no-one wanted to acknowledge as part of the family.