Thursday, December 3, 2009

HST: Passes, but too fast

Not to too much surprise, the House of Commons passed a Ways and Means Motion today on the HST that is worded in such a way that any province -- not just Ontario and British Columbia as the media has reported -- can now convert a provincial sales tax to a multi-stage value added tax that is harmonized with the federal GST. As many readers are aware, currently the HST operates in New Brunswick, Nova Scotia, Newfoundland-Labrador; Québec has one de facto as well. Saskatchewan did have an HST briefly in 1991 but when Grant Devine was defeated by Roy Romanow it was promptly cancelled.

There is no question an HST makes good economic sense from the business side, but implementing one in the middle of a massive recession is rather questionable. My beef is not with the combined tax itself, but the fact the income tax cuts will nowhere near make up for the short-term hit in our pocketbooks. A one percent drop in the lowest bracket at the provincial level in Ontario is simply not good enough. It should have been two percent in the first bracket and one each at the second and third. Also, there simply hasn't been enough time to make the adjustments -- barely a year to get ready for the deadline of July 1, 2010; and only seven months with the official go-ahead. The GST was proposed a year and a half ahead and passed with only a couple weeks to spare for the 1991 deadline -- and only when Mulroney stacked the Senate with "the Queen's appointees."
At least there was advance warning an HST might happen here. Out on the West Coast, it was like a bolt from the blue, not even included in the budget; in fact I found out about it by accident while channel surfing through the time zones one night. Perhaps the thought is, with two such large provinces joining a harmonized regime, it will put pressure on the remaining provinces to do so. It will probably even encourage Alberta, which has long prided itself for having no provincial sales tax, to put one in as uncertainty over the oil patch continues and pressure is brought to become the first province to completely eliminate income taxes.
Also, the issue regarding native people not taxed is a legitimate concern. Treaty Indians not taxed should get a point of sale exemption; it's not all that clear that will continue to be the case despite Ottawa's promises.
It's not the tax itself, it's the way it's being done and the speed ... not to mention the almost complete lack of public consultation. And for that both Harper and McGuinty get thumbs down from me.

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Cari said...

I have voted Liberal all my life but I do not like this HST plan from Flaherty..perhaps it could be done at a different time and a better way. How can we be sure prices will go well I remember the GST from Mulroney, and he told us that prices would go down.

BlastFurnace said...

The prices did drop eventually, Cari, but I do remember the initial spikes myself. I think the first two years of the GST we were running 6% inflation per year, pretty high for Canada -- then we went into negative inflation for a year before things stabilized.

The really insulting thing is that the provincial portion isn't being lowered -- like they were down east and in Québec. The sales taxes ran anywhere from 9 to 13% but dropped to 8% in the Atlantic and 6.5% in QC with harmonization, to help ease the bite. That's not happening here -- instead, we're being thrown "transition grants" to ease the pain.

Big effing deal, most people I know are just going to put it in the bank.

Ian said...

Remember that this tax harmonization comes with a $6B handout from Ottawa to BC and Ontario.

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