Taxation

Pending: shift of sales tax from businesses to individuals

A paper commissioned by the Business Council of British Columbia is part of their nascent campaign for altering provincial sales tax. The aim is a GST/HST-like solution that would reduce payments by business and require other consumers pay PST on a wider range of services.

According to UBC economist Kevin Milligan, a supportive tax environment triggers increased investment that creates new jobs and provides workers with the latest equipment and technology. As a sweetener, he says investment leads to “better wages and stronger economic growth.”

lipstick-on-a-pig-clipart-1 250Economist Milligan recognizes change may  be difficult for government to implement after voters passed the 2011 referendum to reverse BC’s 2010 imposition of  HST.  Options he now suggests are designed to achieve the same tax shift from business to individuals but with cosmetic differences. He calls them “made-in-BC solutions to the PST problem.”

A person depending on the Professor’s paper for understanding would have an incomplete view of PST. Nowhere does he mention the very large exemptions that already apply to business purchases. No provincial sales tax is applied to machinery or equipment used in:

  • exploration for, discovery of or development of petroleum or natural gas,
  • exploration for minerals or development of mines,
  • extraction or processing of minerals, petroleum or natural gas,
  • providing services to manufacturers, oil and gas producers or mine operators,
  • geophysical surveying,
  • local government power generation,
  • logging,
  • manufacturing and processing goods,
  • parts, materials and services to maintain exempt machinery & equipment
  • pollution control,
  • providing manufacturing services to manufacturers,
  • software development.

Nor is PST applied to:

  • Goods obtained for processing, fabricating, manufacturing, attaching or incorporating into other goods for retail sale or lease,
  • Goods obtained solely for packaging and labeling other goods for retail sale or lease.

You may wonder what business purchases remain taxable but, particularly for service businesses outside the resource industries, it is still significant.

When a small but politically influential group advocates change to reduce their taxation by $2+ billion a year, they want the rest of us paying instead. With the potential reward so large, the province’s business leaders will remain persistent in demanding relief from sales taxes. Because they’ve invested millions of dollars in the BC Liberal Party, they expect success.

Business benefits directly from infrastructure and services financed by taxpayers. They expect safe and orderly communities; they expect police and fire protection; they want educated workers, communication and transportation systems; they want utilities to serve their offices, factories and warehouses. They want those things; they just want others to pay for them.

Business leaders don’t think about taxation in the way of U.S. Supreme Court Justice Oliver Wendell Holmes, Jr. In a 1927 case, Holmes wrote:

…every exaction of money for an act is a discouragement to the extent of the payment required, but that which in its immediacy is a discouragement may be part of an encouragement when seen in its organic connection with the whole. Taxes are what we pay for civilized society…


ADDENDUM

Paying the lobbyist to lobby:

According to BC Public Accounts, the BC Government paid $1.9 million to the BC Business Council, April 2013 to April 2016.

That is 230% of government payments to the organization in the preceding 12 years, (April 2002 to March 2013).

Categories: Taxation

12 replies »

  1. I had no idea the PST exemptions were so widespread already. Who, then, are the main players pushing for further shifts: surely not the automotive dealers of BC?

    A family member recently took two “newish” vehicles and traded them in for one new vehicle. Naturally, the retailer wanted to lowball the value of the trade-ins — BUT: they offered a trick that no private seller can: the two trade-ins roughly equalled the cost of the new one, so the value of the sale was basically $0.00. As a result, no taxes were due.

    If the used cars were sold privately, the extra cash earned would have been surrendered to taxes when the new car was bought. ‘Sounds like the car dealers have that one sewn up.

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  2. So tired of these unscrupulous BC businesses. They seem to thrive on the fact that they pay the lowest taxes in Canada. We have the highest child poverty and the lowest minimum wage. The coalition of BC businesses was granted intervenor status in the teachers strike with the province to “ensure that the appeal case includes a business/taxpayer perspective.” They have no problem lining their pockets at the expense of BC citizens. A vote for BC Liberals will ensure this shift to gouge BC citizens continues.

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  3. Of course business ought to be rewarded by not having to pay taxes. They’ve already paid Christy and her B.C. Lieberals so much, they ought to be rewarded. We, the rest of the citizens of B.C., just need to crank it up a notch and give Christy even more of our money. Its so obvious Christy and her financial supporters don’t have all our money yet, so lets get with the agenda and pay Christy and her cabal even more.

    If we have to impoverish a few thousand more disabled people so what. Its important the corporations make even more money. Its not like they don’t supply us with a never ending number of low income jobs. What are all those kids living below the poverty line complaining about? Oh, they’d like to eat 3 square meals a day,. have a decent place to live, be able to have school supplies like the rest of the kids? those kids need to know how to sacrifice for Christy’s friends. They’re Christy’s friends and they make this province so good, just ask them and Christy.

    Now just everyone suck it up. Christy needs a balanced budget before the election and some one has to pay for all that debt B.C. Hydro has, those bridges which are running up debts, etc.

    Get rid of the bitch in the next election, implement a fair tax system and make Christy'[s friends pay their fair share of taxes in this province. It isn’t like they have done much of anything for any one expect Christy and themselves.

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  4. Dear John Horgan and the rest of you NDP MLAs: you probably read this and several other bloggers’ articles, and have figured out that they are well researched and would be an excellent source of ammunition for the next election campaign. It is as if the playbooks have already been written for you. All you have to do now is to gather and organize the information, reduce it to bites that the average British Columbian can understand, and keep hammering the message over and over and over again until it sinks in. Get yourselves on the airwaves and into the newspapers! Be noisy about it and be unrelenting. It couldn’t get any easier for you. The research has already been done and I’m sure that the bloggers won’t mind your helping yourselves to their research. But be careful: the photo-op queen is a wily fox. You need to be on the lookout for the traps she and her cabal will set for you. Good luck.

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    • Maybe the NDP want to “keep their powder dry ” as they say. I mean Chrispy has unlimited government propaganda funds before the election is called and she is not reticent to use it as well. And in the past the Neo-Liberal party of BC has flat out stolen the NDP’s ideas and she is never called on it from the media. I mean they denied foreign speculation was a problem for years until they saw the polls and then brought in a half assed tax it making sure everyone knew theirs would be higher than the bad NDP’s. And the media lapped it up. The problem we have is with the talking heads on TV and radio and the stupid uninformed voters that vote by rote.

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      • The NDP may be “keeping their powder dry,” but what I’m afraid of is that they are going to dither around instead of getting their ducks in a row, and then getting caught with their pants down. Maybe David Eby would make a better leader. He seems to be a good researcher and he knows how to get his message across. His name is more recognizable than Horgan’s. The other problem the NDP needs to overcome is the squabbling over internal differences in their ideology. That is equivalent to having two NDPs, further watering down the votes. If they can’t manage to throw the current bunch of crooks out with all their shenanigans, and with everything handed to them on a silver platter, then they don’t deserve to win.

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  5. Another category that is PST exempt is safety equipment;

    Hard hats, ear plugs, safety vests, eye ware,masks for dust,organic vapours, etc,

    Some of the PST does require tweaking like the silly situation with raincoats where a yellow coat was classified as safety equipment while the red one was not.

    I think that one was tweaked if I recall correctly.

    I have been involved in small business since 1974. Reading the Milligan paper it is something written from an academics point of view with no experience on the ground in small business ventures.

    The PST has plenty of exemptions for products ” used in the production of” while leaving the capital costs such as tooling and infrastructure taxable for the end user.

    This is what Milligan and the business council advocate for in reality. They want exemptions on capital costs which shift the tax balance onto the consumer.

    Just because i purchase a hammer to pound a nail why should I get a 7% break over my neighbour who purchases a hammer to accomplish the same endeavour.

    This is the problem with academics. No experience in business and everything looks great on paper.

    Professor of economics? Would that be the Milt Friedman nut bar economic theories taught in Chicago?

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    • I take a less charitable view of academics paid to publish for lobby groups. When one wants to earn extra money as a polemicist, he/she avoids peer reviewed journals where work is subject to legitimate review by experts. Some of the sponsoring organizations are very well funded and they can guarantee publication in mainstream outlets. However, they want results that suit their goals.

      We might be hearing more from Kevin Milligan on this and other subjects. His UBC web page indicates he is on leave and not teaching this year.

      The BC Business Council doesn’t have funding like the Fraser Institute but it has received almost $2 million from the BC taxpayers under the Christy Clark’s “one hand washes the other” program.

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  6. BC Chamber director Dan Baxter had an article in June about the same item and I went after him in the comments section of the VS.
    To have a director of the Chamber of Commerce who does not fully understand PST tax requirements is foolish and I made him appear so.

    http://vancouversun.com/business/local-business/five-things-b-c-chamber-of-commerce-on-scrapping-pst-for-a-new-value-added-tax

    Now suddenly when I use the FB plugin on the VS comments section my comments do not appear. No mystery there…..

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    • Rob Shaw, the Sun reporter, is one of the thin-skinned “journalists” who doesn’t like being called out for falsehood or misapprehensions. I pointed out incomplete reporting on the “whistleblower” who supposedly initiated the accusations that led the Health Ministry firing health researchers who scared Big Pharma supporters. The accuser had rather interesting things said about her (when she was using one of her other names) in Supreme Court of BC during a matter not related to government business. Let’s say it raised questions about her credibility.

      However, the background was not reported because the whole story was not helpful to a defence of government actions. My pointing it out to Shaw caused him to be offended. He blocks me on Twitter for that and other reasons. I think he prefers to just stick to government narrative; it’s the safe route.

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  7. The motto of the BC Business Council is, “Where leaders meet to unlock BC’s full potential.”

    A quick tally of political contributions to the BC Liberals just from the companies associated to the Council’s 2016 Executive Committee (not including any individuals or connected companies) reveals donations of $3,409,310.

    http://www.bcbc.com/executive-committee

    Seems to me the motto should read, “Where cronies meet to fully unlock BC’s treasury.”

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  8. @Dan the VS & Province blocked my FB commenting ability as well. I suppose the truth about the Chinese controlled board at the Chamber of Shipping of BC and the inconvenient truth that they paid Marc Garneau to speak when he was campaigning for LPC leadership. Now Garneau is Transport Minister and we never hear any media connecting the dots on why the Federal govt. is doing nothing to slow port expansion plans on the tidal Fraser which DFO has already admitted is not getting salmon returns anywhere near expected levels. I wrote our fresh Fisheries Minister (not the one who stepped down) and received a nice note back deferring responsibility to the Provincial government, I thought DFO was federal jurisdiction and they were going to now implement the Cohen commission’s recommendations. To allow US thermal coal, LNG, jet fuel and more industrialization of this great river is Russian roulette. Sorry for the drift Norm, some points just need to be made.

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