Last week, the Citizen carried a guest column by Jock Finlayson reflecting on the PST one year later.
Mr. Finlayson is the executive vice president and chief policy officer for the Business Council of British Columbia. He is also a frequent pundit on news programs and radio stations discussing economics and business in British Columbia.
I, on the other hand, am not, which is perhaps why I have trouble with Mr. Finlayson's view of the provincial economy and the effects of the HST/PST.
However, I think that my real trouble with Mr. Finlayson's point of view stems from his narrow focus.
For example: "There can be no doubt switching back to the PST altered the business landscape in a way that left the province at a competitive disadvantage."
Exactly how is that? Simply stating the fact isn't really good enough. I could just as easily say that switching back to the PST has been the best thing for the people of the province, but without justification it would be hogwash.
Did switching back to the PST really disadvantage business? One could make a very strong argument that we had the PST in place for decades and businesses both existed and thrived in the province. The HST replaced the PST. It was not a new tax and neither is the PST.
We simply returned to the way that we used to collect taxes.
"Reinstituting the PST has increased what economists refer to as the marginal effective tax rate on new investments..." Sure, one could believe that. But again, the PST existed before the failed and miserable experiment with the HST. How have things changed?
In other words, what is different? Why are businesses suddenly at a disadvantage?
"The PST pushes up costs for a wide range of items that companies typically must purchase to run their businesses..." Ah. Here is the crux. It costs the companies more to buy stuff but only from companies where the PST applies.
His argument seems to be that companies need to make these purchases to run their businesses so it is unfair to charge them taxes on these purchases.
Maybe but I could make the same argument about my purchases. I was suddenly paying HST on a great many items that previously hadn't been taxed - like food and services - things that I need in order to live.
Quite frankly, in the choice between ensuring that some multi-national corporation that has oodles of tax lawyers finding loopholes or even a small one-person business paying PST on the items that they need to operate and me being able to afford to live, I know which side I stand on.
And let's face it, all the HST did was shift the tax burden off of corporations and on to ordinary folk. I don't mind paying taxes to build roads or run hospitals or staff schools. I do, however, object to paying taxes so that a company has a better bottom line especially when they are not passing along the savings.
But as Mr. Finlayson points out: "With the HST, companies received rebates for the sales taxes paid on these types of business inputs. That's no longer true under the PST ..."
Again, where did the government get the money to make up for the lost revenue? You and me.
A year ago when I went to purchase a take-out meal and found that the price had dropped by more than $2.50 eliminating the HST made a big difference. I know that I could have afforded to pay the HST but there are many people for whom the HST was the proverbial straw that was breaking their back.
The interesting thing about Mr. Finlayson's article is that somewhere in the middle, the conversation shifts from the PST to the question: "But how does the province compare in other areas that also influence competitiveness?"
The answer seems to be "quite good." Low electrical rates, a well-educated or high-quality workforce, low corporate income taxes, and overwhelming abundance of natural resources make British Columbia quite attractive.
Many studies, going back to the mid-1990s, argue that British Columbia is a superior location for corporate headquarters and international businesses. If anything, the present government has bent over backwards to improve our image.
Most of the complaints that Mr. Finlayson raises stem from exactly the sort of low-tax environment that he appears to advocate. Increasing energy costs are being driven by engaging in the free-market economy not by the PST. High housing costs are a consequence of land speculation and B.C.'s reputation as being one of the best places to live in the world.
The conversion back the PST is not the problem that ails our economy. The problem is forgetting why we have an economy in the first place.
