According to local Fight the HST organizer Eric Freeston, it is completely unfair that B.C. taxpayers have to pay back the $1.6 billion HST transition money without it being prorated.
“What’s going on right now is as long as the HST is in place, the federal government is going to continue to collect revenue and it’s going to be in the hundreds of millions of dollars by the time they’ve got rid of the HST,” Freeston says, adding the collection of the HST is a windfall for the federal government.
Responding to Freeston’s comments, a Ministry of Finance spokesperson says the province receives the revenues from the provincial portion of the HST, which is seven per cent, not the federal government.
“While the federal government collects the entire 12 per cent HST, it only keeps the five per cent federal portion — formerly called the GST. The provincial portion is paid to BC based on the revenue allocation framework set out in the sales tax harmonization agreement between BC and the federal government.”
Freeston on the other hand says finance minister Kevin Falcon should have insisted the federal government repay B.C. the extra revenue generated by the HST being in place.
“Especially if we’re expected to pay back the federal government’s seed money, if you want to call it that. We’ve been not only sold out by the federal government, but we’ve also been sold out by the provincial government,” Freeston says.
Countering, the ministry says the minister negotiated the best deal possible for the repayment, saying the federal government was not obligated to change the contract it signed with B.C., which mandated that the province must keep the HST in place for a minimum of five years or the full $1.6 billion had to be repaid.
It should be noted, the ministry adds, that the entire repayment was due to be repaid by March 21, 2012, and the federal government agreed not to charge interest on the repayment, even though it will take more than five years. That agreement will save B.C. $118 million.
Freeston also believes B.C. taxpayers are being punished for exercising their democratic rights, which he finds ironic because the provincial government never had a mandate to implement the HST in the first place. “Honestly I don’t think the BC Liberals want to get re-elected here because they are doing everything they can to irritate the public over the full issue, refuse to get rid of the HST quickly, and Kevin Falcon refuses to give us a date as to when he’s going to get rid of it. Then he’s sitting there giving us these horror stories about how much it’s going to cost us to return to the old system.”
Responding, the ministry says returning to the PST is complex and that it is expected to take approximately 18 to 24 months. The province needs to develop transitional rules in consultation with the federal government, rewrite provincial tax laws and regulations, and rebuild its capacity to administer the PST. Business will need to readjust their accounting and administrative systems and prepare to collect a second sales tax. By the time the transition is complete, about 30,000 new businesses in B.C. will have started up under the HST. They will need to learn to administer the PST in tandem with the GST.
Disagreeing, Freeston doubts it is that difficult. “It only took them a matter of months to dismantle it (the PST/GST system). Don’t tell me it doesn’t take a matter of months to dismantle the HST,” he points out, adding the old system was in place for nearly six decades.
“You ask anyone on the street why it would take that long and they’ll tell you the same thing, it doesn’t make any sense to them,” Freeston says.