To most that follow British Columbia politics from afar, myself included, it’s more than a little surprising that, with all the drama over the last year or two, the BC Liberals stand a more than decent chance of winning the next election.
There is one big caveat though: the BC Liberals need to get out from under and away from the Harmonized Sales Tax (HST). When she launched her campaign for the BC Liberal leadership last week, Christy Clark presented one scenario that would seem to offer the party the chance to do just that:
“Let us consider putting the proposed referendum question to a truly free vote of the Legislative Assembly. And you know how that question goes: that this house is in favour of extinguishing the harmonized sales tax. Now if this process is successful it would put the HST behind us by March 31st. If it’s successful, we would notify the federal government immediately of our intention to withdraw after the 18 months notice that’s required in the agreement. We would start to negotiate with them to get out earlier than the five-year agreement currently allows. And unfortunately, it would mean going back to the GST and the PST. But we won’t revisit the HST for another five years. It is time for British Columbia to have certainty around this question.”
“After almost a year, the public still hates the HST. And I think we need to face some hard realities here. And that is if this goes to a referendum, a real referendum, the HST will almost certainly fail. We need to take our heads out of the sand on that, and we need to get on with restoring our economy. No one is served by uncertainty.”
Personally, I think sales tax harmonization makes good economic sense and good policy sense. The devil is in the details, and you need to do everything you can to ensure it’s as close to cost-neutral as possible for taxpayers, but it makes sense on all kinds of levels. Less paperwork for businesses, less paperwork for government. And I think undoing it will be a major logistical and procedural headache.
In BC, though, the implementation was clearly bungled. After telling the public harmonization wasn’t on the agenda during the election campaign, just days later suddenly plans to harmonize were announced. It reeked of dishonesty. While it belatedly began to try to sell the public on the merits of the HST, it was never able to get over that initial perception of dishonesty.
In any democracy, you must listen to the will of the citizens, and the people of B.C. seem clear that the HST has got to go. The government has lost the battle on this one, and it’s time to move on. Prolonging this process through the referendum next fall would be pointless, and would only prolong the economic uncertainty while seeing time and resources wasted fighting a lost cause.
Clark hasn’t committed to a course of action on the HST – she plans to consult party members and the public in the weeks ahead – but her outlined option seems the best way to move the province forward and allow it to put the HST behind it. If the legislature votes to kill the HST the referendum becomes unnecessary and the process of unwinding the tax can begin.
I do have one big question though, and that’s what of the $1.6 billion in transition funding that the federal government sent to the province to sweeten the deal? It seems safe to assume the feds are going to want that money back; just saying “keep it” would hardly be fair to the other provinces. I doubt the feds would take a super hard line and demand it all back at once; this would be part of the negotiation but I could see it being paid back over time or applied over time against future transfer payments. Still, it’s going to but a crunch on the province’s budget and necessitate some tough choices that need to be part of the debate.
Anyway, here’s the video from Clark’s leadership campaign launch last week:
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