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B.C. Premier Christy Clark is facing calls to eliminate a 7 per cent tax on electricity for industrial and business use.CHAD HIPOLITO/The Canadian Press

The British Columbia government is under pressure – from business, community leaders and trade unions – to give BC Hydro's industrial customers a tax break to protect resource jobs in energy-intensive sectors.

The lobbying effort, which aims to eliminate the province's 7-per-cent provincial sales tax on electricity for industrial and business use, is timed to influence the provincial budget that will be introduced on Feb. 21.

Although the government is projecting a surplus, it is also being pressed for more spending for education, health care, affordable housing, transit and social services. All of those issues will have a high priority as the governing B.C. Liberals prepare for the May provincial election, with a February tailored for maximum electoral appeal. The proposal to eliminate the PST for commercial use – and in particular for the province's pulp and paper sector – doesn't have the same populist appeal as some of the competing proposals, though it is aimed at a vulnerable point in the governing party's record. While B.C. is enjoying economic and jobs growth overall, many rural resource communities are struggling. Those communities host the most energy-intensive industries – forestry and mining. The recommendation to drop the PST on electricity, which brings in $160-million each year to the province, was made by the government's own Commission on Tax Competitiveness, which last November noted that British Columbia is the only jurisdiction in North America that levies a retail-sales tax on electricity purchased by industry and business. Residential users in B.C. do not pay PST on electricity.

Last week, eight mayors from forestry-dependent communities issued a letter calling on the province to axe that tax. "Recent curtailments and mill closures across the province have significantly impacted communities like ours, demonstrating that the competitive threat facing our local mills is real," the letter states.

"Protecting and growing jobs in rural communities is a priority that we can all agree is important for British Columbia and its future." The idea has won the support of the union representing the province's troubled pulp and paper work force.

"We want to be part of helping the industry survive," said Unifor's Western director, Scott Doherty. The union represents 4,500 pulp and paper workers in B.C. – about half the number of people in that sector a decade ago.

Mr. Doherty said his members have accepted concessions including wage rollbacks, and now it is the government's turn to be part of the solution.

"We are supporting this change. Unifor would think the provincial government needs to invest in communities and invest in workers, and this falls into this category of investing in good paying jobs."

The poster child for the proposed tax change is Catalyst Paper, which has climbed out of bankruptcy protection and has just gone through another major financial restructuring.

The pulp and paper producer has long been BC Hydro's largest customer, accounting for about 5 per cent of Hydro's electricity load.

Last year, the company paid roughly $9-million in PST on its electricity bill.

Stew Gibson, a senior executive with Catalyst Paper, said the tax puts his company on an unequal footing with its competitors from Quebec to Scandinavia.

The company, with mills in three B.C. communities, wants to retool its plants to move away from newsprint to more viable products, such as industrial paper towels.

"The tax change would have a big impact," he said.

"The liberated cash would enable us to execute our strategy to reinvest in our B.C. operations."

Earlier this week, Premier Christy Clark announced a refreshed jobs plan that promises to pay more attention to rural communities that have not enjoyed the same growth as Metro Vancouver and other urban centres.

However, even if her government approves the tax change, it is unlikely to be enacted before the May election.