TAX NEWS - 2010

B.C. HST: It's time for premier to clean up tax mess he created with HST

It looks like B.C. Premier Gordon Campbell is going to attempt a "Mulroney" in ramming through the harmonized sales tax on July 1, regardless of public opinion.

Prime Minister Brian Mulroney, back in 1991, pushed through the goods and services tax in the face of the same sort of opposition to a national sales tax that, like the HST, is aimed at cultivating a more competitive economy.

Mulroney's assumption was that people would eventually get used to the new tax and opposition would dissipate, which probably is Campbell's thinking too.

Conveniently, Mulroney retired from politics in 1993, leaving others in his party to face the political consequences for the GST. Conservatives were reduced to two seats in the ensuing election.

But in B.C., there is one important difference at play -- this is a jurisdiction with legislation that has enabled HST opponents to launched a petition campaign to reverse the tax.

The petition won't kill the tax, only nudge the government to reconsider it, which a majority Liberal administration is free not to do, or hold a non-binding referendum on the HST in 2011.

The very fact of this legislation's existence sets up an expectation that, in a democracy, the provincial government will be accountable to the citizenry.

Everyone I've asked in the past month has confirmed that they have signed the petition, and many, however erroneously, expect the anti-HST drive to result in the ultimate quashing of the tax.

As the Campbell government forges ahead -- it has already accepted the first of three payments from Ottawa to cover provincial transition costs -- and ignores the petition gesture, fury will mount further.

This is an extremely unhealthy process. And B.C.'s premier should therefore pause and consider his options.

Campbell would be wise, as a gesture of goodwill, to return the cash already received from Ottawa and proceed to start over with respect to an HST for B.C.

His own former energy minister, Blair Lekstrom, in resigning last week, similarly urged him to delay the tax measure.

The Campbell government made every political mistake in the book in introducing the tax, especially by stating during an election campaign last year that the Liberals would not bring in an HST.

It should be noted that the harmonized tax, blending the GST and provincial sales tax for a 12-per-cent levy, is praised by economists. There's a case to be made for it.

First, though, Campbell should call for six months of HST consultations across the province.

Second, he should pledge creation of a special panel to monitor actions of the corporate community, which in theory is supposed to pass along its own tax savings so that consumer prices don't increase as a result of the HST.

It's one thing to promise no increases, another to have a government panel verify and report publicly on this expectation for the first two years of the HST's existence.

Third, the province should follow the lead of the Dalton McGuinty government in Ontario and provide transition payments to middle-income British Columbians to help them adjust to any temporary increase they'll face in taxation.

This is a province where a lot of people have high housing costs; they simply don't have discretionary dollars for new taxes.

Fourth, again following Ontario's lead, the Liberals should provide a measure of comfort to people by making coffee and newspapers HSTexempt.

Those governing B.C. must always remember this is a populist province, with an engaged citizenry facing a generally high cost of living.

Campbell knows he has erred, describing himself as tremendously unpopular. Whether he eventually resigns from politics over this matter is no longer the issue.

He has created a political mess and it's incumbent upon him to start a cleanup.