HST: BC eases off on HST for consumer - with a cost

British Columbia is following Ontario's retreat on the HST, rolling out fresh rebates for new housing that will cushion the tax blow to consumers – but will cost the provincial treasury $80-million.

And another step in that retreat could be in the offing. This morning, Finance Minister Colin Hansen will meet with restaurant industry representatives who will push for an outright exemption from the increasingly controversial sales tax, a move the sector says would cost $700-million.

Under the measures announced yesterday, buyers of new homes in British Columbia won't have to pay the provincial portion of the harmonized sales tax for the first $525,000 of purchase price, up from the previous ceiling of $400,000, pushing the maximum rebate to $26,250 from $20,000. In an e-mail, Mr. Hansen chalked up that move to the industry's lobbying effort and the province's unique housing market, said M.J. Whitemarsh, CEO of the British Columbia Home Builders Association.

Mr. Hansen isn't saying yet if he will give the restaurant industry relief, but he is clearly signalling that any measures will be constrained. British Columbia has all but exhausted the point-of-sale exemptions allowed by Ottawa, meaning that any further offsets to the HST will come straight out of B.C.'s pockets, at a time when the province is saddled with a $2.8-billion deficit.

The Finance Minister is ruling out any new measures that would further tinker with the structure of the HST.

If the restaurant industry gets relief, it will be outside the boundaries of the HST regulations.

Ian Tostenson, president and CEO of the British Columbia Restaurant and Foodservices Association, has said there are several possibilities, including a holiday on provincial liquor taxes, reduced small-business taxes, or even having the province pay part of companies' municipal tax bills.

Yesterday, Mr. Tostenson said he will make the case to the Finance Minister that the restaurant industry will need to resort to widespread layoffs if there is no relief, since it will see little reduction in costs with the new tax, while its customers will face a new provincial levy on dining bills.

Other industries will see costs fall as they are able to pass through the sales tax bill to consumers, a feature that Mr. Hansen says will spur economic efficiency and growth. Economic theory backs him up, but the Liberal government has seen its popular support melt since announcing in the summer that B.C. would harmonize its provincial tax with the federal GST on July 1, 2010.

The Manitoba government decided this week not to jump on the harmonized tax bandwagon, because of concerns that consumers would face higher prices on many everyday goods and services. The New Democratic government conducted an analysis that showed harmonization would cost consumers $400-million.

Saskatchewan Premier Brad Wall also reiterated that he has no plans to make the switch to a harmonized tax.

Ontario Premier Dalton McGuinty said he is not concerned that the two Prairie provinces' outright rejection of harmonization will make it a tougher sell for him. Last week, the government gave consumers new relief from the HST, granting an exemption on newspapers and snack foods under $4. But opposition members in Ontario stepped up their efforts to derail the HST following this week's introduction of legislation on the proposed 13-per-cent, value-added tax.

In B.C., the opposition New Democrats also want to scrap the move to the HST, although they have little prospect of doing so. NDP finance critic Bruce Ralston said the changes announced yesterday indicate the intense lobbying effort that the HST has triggered. "Everyone is jockeying for position to save their industry," he said.

On that, at least, the Liberals and NDP agree. "It seems to me there hasn't been an industry that hasn't come forward," Mr. Hansen said.

(prepared by Karen Howlett in Toronto/Globe & Mail)