The provincial government is adding a little sugar-coating to the pill B.C. voters will be asked to swallow next month.
Finance Minister Kevin Falcon announced Wednesday that if British Columbians elect to keep the HST in the upcoming referendum, the tax’s rate will be reduced by two per cent. However, B.C. residents will have to wait three years to realize the savings brought on by the rate cut.
Under the government’s plan, the current 12 per cent HST would be reduced by one per cent on July 1, 2012, before dropping to 10 per cent in July 2014. Rebate cheques of $175 will immediately lessen the blow for families with children and lower-income seniors.
To offset the HST reduction, Falcon is proposing to raise the corporate income tax rate by two per cent and postpone a reduction to the small business tax rate. The corporate rate increase is expected to cost business $390 million a year, with the deferred reduction for small business worth another $280 million annually, eating into the estimated $2 billion benefit the government contends the HST will bring to business.
But the changes clearly represent a tax savings for individual British Columbians down the road. An independent panel found that a 12 per cent HST costs the average B.C. family $350 a year. At 11 per cent, the hit is reduced to $115, and with a 10 per cent HST the average family will pay $120 less tax than under the PST/GST system. Factor in the $2.3 billion it is estimated to cost to return to the previous system, and it becomes clear that a reduced HST is the most sensible economic choice.
However, the way the HST was brought in has still left a bad taste in many voters’ mouths. And with those voters about to cast their ballots on the HST in the referendum which begins June 24, the government can only hope a potential tax savings down the road will be enough to wash that taste away.
— Penticton Western News