Single best thing they can do for business

BC Minister of Misinformation Colin Hansen worries that HST is misunderstood by four out of five British Columbians. Of course, what he really means is that tax opponents have not confined discussions to talking points approved by Liberals. We examine another unapproved analysis.

A major claim in support of HST is the elimination of tax cascading, which arises when a product’s final selling price contains tax that is taxed when PST is added to a consumer’s cost. Liquor sales provide the worst examples of cascading tax. Take an example of Schloss Schonborn Riesling with a BC Liquor Store price of $19.99 total. In fact, the winemaker’s distributor received $9.10 for the bottle of wine. Governments added $8.28 tax but called it excise, fees and markup. Add in the final GST and PST and the difference between the distributor’s cost and the final consumer price shows combined tax of $10.89 or 120%. The cascading effect occurs because the feds collect GST on excise tax and the province collects PST on liquor taxes that it prefers to be called markup.

Now, Colin Hansen wants you to know he opposes cascading taxes but not all of them. Instead of allowing liquor prices to fall because the HST rate is lower than combined GST and liquor sales tax, they will raise the markup and thereby exacerbate the cascading effect. Under the tax legislation Liberals enacted, they made sure that HST applies to the Translink parking tax of 21%, thus creating another example of cascading, the very thing they say should be eliminated.

Let’s imagine a different example. If your 8-year-old water heater dies, you call a plumber. Under present rules, the tradesperson quotes this: parts $400 and labour $500, GST $45, Total $945. Under the new system, the quote would be: parts $380 and labour $500, HST $106, Total $986. The parts price declined $20 to reflect the plumber’s PST saving when he purchased the water tank. We eliminate the cascading tax but the consumer pays $41 more.

Campbell and Hansen are selling a program that takes money from the pockets of consumers and gives it to business. Without doubt, the revised tax regime is good for business, in fact, they say, this is the single best thing that can be done for business. Other than giving them direct grants, that is true. Since the policy is revenue neutral but saves business $1.9 billion in year one, we know who pays that $1.9 billion more in tax. The consumer. Now, could someone explain how this article misleads anyone?

Categories: Taxation

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