Province was urged last December to quickly impose HST

Jeff Nagel - BC Local News Published: August 12, 2009 1:00 PM

The provincial government was advised last December to pursue a harmonized sales tax – five months before the provincial election – but cautioned that it would be politically explosive.A report from the B.C. Progress Board called on Victoria to adopt an HST "as soon as possible" on grounds it would improve productivity over the long term and boost business investment.The premier and finance minister have been accused of hiding their intentions from voters and both have claimed the HST wasn't on their radar as an idea until after the May election.The Progress Board report "Investment in British Columbia: Current Realities and the Way Forward" warned late last year B.C.'s productivity is slowly losing ground against global peers.It said replacing the PST with a harmonized tax would be "by far the best way to increase investment in B.C." because it would eliminate the PST on those investments, a cost that puts B.C. businesses at a disadvantage versus many outside competitors.

But the report noted the HST "entails a substantial and highly visible shift of the tax burden from businesses to consumers, even if reduced input costs are eventually passed on to consumers in the form of lower prices."Restaurant meals, home heating costs, basic cable and phone bills would all go up, it said. "Consumers would face higher taxes on a wide range of services and new housing currently exempt from the PST," the report said. "Public opposition to such a shift would be a substantial concern to policy makers."

There are ways of addressing the inequities, the report said, noting one option to reduce the impact of the extra seven per cent tax on new home prices would be to exempt the land value of the property from a new harmonized tax. It also said higher sales tax rebates could be provided to aid lower income earners.The progress board is a government-appointed body that benchmarks B.C.'s progress against a variety of targets and provides advice on policy reforms.The 12 per cent HST is to be implemented next July, replacing the seven per cent PST and five per cent GST.The provincial government has estimated the HST will remove $2 billion in costs for B.C. businesses.