A prescription for tax changes in B.C. proposed by a government-appointed panel is coming back to haunt the BC Liberals just a week before British Columbians go to the polls.
For several days now, BC Liberal Leader Christy Clark has been derailed from her jobs-and-the-economy message over renewed questions about her willingness to adopt a new Value Added Tax (VAT) model that is being pushed by the province's business community.
Although Ms. Clark denied on Monday that she is looking at such a change, she and her Liberal government left the door open to a VAT as an alternative to the Provincial Sales Tax (PST) for months.
That led critics to warn voters to brace for a repeat of the controversial imposition of the Harmonized Sales Tax (HST). The Liberals said in advance of the 2009 election that they did not contemplate merging the PST with the federal Goods and Services Tax, but imposed the change just months after the ballots were counted, sparking a tax revolt that led to the repeal of the HST – and the resignation of then-premier Gordon Campbell.
As recently as Thursday, Ms. Clark said the change proposed by business leaders was under consideration: "No way, under no circumstances is the HST coming back while I'm premier," Ms. Clark said at a campaign event. "But we do know the tax competitiveness panel came with a recommendation for a value-added tax. Which is different. What we've said is, we will be prepared to talk to the business community and British Columbians about different ways we could reach tax competitiveness."
At another event, she repeated that the recommendations of the business-led tax panel are under consideration: "We're going to talk about all the things they recommended, but we will not end up with anything that looks like an HST."
That led NDP Leader John Horgan to conclude that the HST, by another name, is coming back if the Liberals win: "The BC Liberals have been taking money from hard-working British Columbians and handing it to their rich donors. Now we've learned that Christy Clark is planning to bring back the HST after the election."
And Bill Vander Zalm, the former Social Credit premier who led the tax revolt against the HST, said Monday he is ready to revive his campaign: "The VAT, the HST, they are the same thing. Of course they are going to do it – the business community wants it. But they won't say anything before the election."
But on Monday, Ms, Clark shut the door on both: "No to HST, no to a Value Added Tax."
The BC Liberal Party also issued a statement to reassure voters that a VAT is no longer under consideration. "A panel on tax competitiveness last fall recommended a number of measures including removing PST on capital purchases and creating a B.C.-based Value Added Tax. The only recommendation we are moving ahead with is our commitment to exempt some inputs that job creators pay like the PST on electricity."
Greg D'Avignon, president of the Business Council of BC, said he hopes the government that is formed after the May 9 election will be open to a broader tax-reform agenda: "What happens when the global economy starts to slow again? We're not ready for it. These kinds of reforms can't just be tinkering around the edges," he said. He said rising protectionism south of the border has made the need for tax reform to make B.C. businesses more competitive even more acute now.
"Frankly, we have to stop talking about it and embrace the reality that the world has changed. It's no longer the 1940s and we have a small, open trading economy. We have to figure this stuff out or we are going to get left behind."
The tax review was launched in 2016 to consult with business and make recommendations to improve the tax structure, "while respecting the outcome of the 2011 referendum to eliminate the HST."
What the business panel called for, in its report to the province last fall, was to replace the province's provincial sales tax with a made-in-B.C. VAT. "The PST was found by the commission to have the greatest negative effects in terms of the incentive to invest, operating costs and economic efficiency," the report said.
There is little difference between the HST and a VAT and the business community argues that the PST is harmful because the tax is levied at every stage of the manufacturing process.
But the shift to the HST in British Columbia angered citizens who found themselves paying tax on services such as restaurant meals. It was seen as a shift in the tax burden from corporations to individuals.