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.”
Economist 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,
- 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…
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).