TAX NEWS - June 2010

Canada Tax: HST or not, government needs money

Premier Gordon Campbell began a new phase of his defence of the HST yesterday. It sounded as listless, opaque and unconvincing as all the previous phases.

Campbell said he was going to get out and explain the harmonized sales tax to British Columbians after the legislative sitting ended.

Before he had made a single sales call Blair Lekstrom quit as energy minister, citing the HST.

That doubles the pressure on the premier to justify his decision to meld the provincial and federal taxes.

But judging by his performance on Bill Good's CKNW radio show yesterday, he's just not up to it.

There are only two new elements to his line of patter on the HST.

One is a much more explicit acknowledgment of what a disaster his communication plan has been for the last 11 months. "I'm the first to say frankly that we couldn't have done a poorer job of rolling this out," he said.

The other is a challenge to tax opponents to identify how they would make up the $1.6 billion that B.C. got as a signing bonus from Ottawa for bringing in the new tax (a bonus diluted by the fact that British Columbians are federal taxpayers, too). About $500 million of that has already been budgeted.

Most of the rest of his appearance was the standard jive that people have been listening to with increasing skepticism for almost a year.

"It's the right thing for B.C."

"The reason this has been done is to help our economy move ahead and make us more competitive."

"It's not 13 per cent (like it is elsewhere). It's 12 per cent."

"It will create 100,000-plus jobs by 2020."

There was one glimmer of a frank and realistic answer.

Asked why a restaurant patron would go along with the HST when it's going to cost more to dine out, Campbell said: "Let's be honest with one another. When the energy, mining, forest, agriculture and technology industries are moving ahead, all of our economy benefits ... all of us benefit."

In other words, consumers are being asked to take one for the team. We'll pay a bit more at the cash register to help business. As a matter of fact, we'll pay about $1.9 billion more. In return, businesses will grow and we'll presumably make the money back as the result of a flourishing economy.

Campbell can't seem to say that directly because it's too stark. But that's basically the deal.

Ironically, Lekstrom is clearer on the HST benefits than Campbell is, even though he quit over it.

It's worth remembering that Lekstrom actually supports the HST. He's only quitting because the government won't postpone it, back up and engage with taxpayers to explain it before it takes effect.

His resignation letter said the government believes it will help B.C., but "as we have been unable to bring the public along, I acknowledge there is a need to re-evaluate this decision."

So he advocated a dialogue about tax policy.

"As the demand for services continues to grow, we must review current systems and make some difficult decisions; do we increase income taxes, increase the PST, implement the HST or cut programs and services?" he said.

"I firmly believe that British Columbians must be realistic and recognize that without a strong economy and competitive tax regimes, government cannot afford to meet their continued demands."

I talked to Lekstrom 40 minutes after his resignation was announced. Free from the constraints of cabinet confidentiality, he put it in even clearer terms. "We can't sustain what we're doing," he said. "No government could."

It's a little chilling to hear that from someone who's been sitting in the inner circle for the last two years.

But the message will go right over the heads of people who have been deluded by Bill Vander Zalm into thinking that if they sign a petition, they'll be keeping their taxes down.

Imagine the looks on their faces when the government -- any government -- starts grappling with future budgets. No matter what you call them or how many signatures get collected, taxes are going in only one direction -- up.

That doesn't fit into Campbell's pitch. And nothing in his explanation has resonated yet.

If he can't sell the benefits, his only hope is that the drawbacks have been overhyped and won't be as bad as advertised.