The B.C. Liberal government is promising a two per cent cut to the harmonized sales tax by 2014, an effort to sway the public in favour of the tax in a referendum vote next month.
The mail-in ballot will determine whether the province will stick with the HST introduced last summer, or return to the former tax system, which included a separate seven per cent provincial sales tax (PST) and five per cent goods and service tax (GST).
The loss in revenues from the tax cut -- the first one-per cent drop will take place on July 1, 2012 -- will be mitigated by an increase in the corporate tax rate to 12 per cent from 10 per cent next January. A planned cut in the small business tax rate to zero from 2.5 per cent next April will not take place. A one-per cent reduction in the HST comes at a cost of $850 million in lost revenues.
Jobs, Tourism and Innovation Minister Pat Bell said the government has tried to respond to the findings of a panel they commissioned, as well as input from the public, which included province-wide telephone town halls. The panel found that on average, families would pay $350 a year more under the HST.
"I think most people wouldn't have guessed that we'd be prepared to increase the corporate taxation rate in order to find a way to reduce the HST amount," said Bell, the MLA for Prince George-Mackenzie. "I'm hopeful people will be able to embrace this new model."
The Liberals are making the corporate tax rate changes to keep their promise to balance the budget by 2013-14. The corporate tax hikes are expected
The Liberals are also offering $175 rebate cheques to families with children under 18 and low-income seniors as a bridging mechanism until the first HST cut is made.
The Liberals say that once the HST had been reduced to 10 per cent in 2014, that B.C. families will on average pay $120 less than under the former tax system. Still, by that time families will have paid on average more than $800 more in taxes.
Despite the promise dismissed the Liberal's HST fix as an effort at vote buying. "I think what we are seeing from the government is a desperate effort," he said.
Dix argued that business will still be hugely ahead under a reduced HST, even with increased corporate taxes, and that families lose.
He said he still plans to campaign against the HST in the referendum vote.
The public responded angrily to the introduction of the HST last summer. The referendum vote next month is a result of a successful initiative petition led by former-premier Bill Vander Zalm last year, which collected more than 700,000 signatures.
Prince George anti-HST campaigner Eric Allen said he said the promised changes haven't changed his mind, particularly since he does not trust the B.C. Liberal government. He also argued that business will still be ahead under the changes at the expense of consumers. "I'm still 100 per cent against it," said Allen, who said they plan to take their message to north-central B.C. communities ahead of the vote.
Political scientist Norman Ruff said it's clear the Liberals have been listening to the public, the question is whether they trust them to deliver. "This is a major step not just to win the referendum, but laying the ground for the election to come," said Ruff, a professor emeritus at the University of Victoria. "It improves their odds, but there's just that big question mark -- do people trust them?"
