B.C. Liberals to cut HST if voters support tax

VICTORIA - Premier Christy Clark moved Wednesday to save the harmonized sales tax from defeat in an upcoming referendum with promises to cut the tax by two percentage points and to offer rebate cheques.

Clark, who inherited the unpopular tax from former premier Gordon Campbell, said she became convinced she needed to adjust the HST after an independent panel report concluded the tax adds an average of $350 worth of extra costs to families.

"It's fairer," said Clark.

"My direction to the finance minister was we have to find a way to make sure this is fairer for families, recognizing that that $350 is a lot of money for people."

She said her government will introduce changes to the HST in the legislature that include cutting the HST to 10 per cent from 12 per cent by July 1, 2014, postponing tax cuts to small and large businesses and offering families with children and low and modest-income seniors one-time transition cheques of $175 per child and senior.

Clark said ensuring British Columbians make up the $350 tax hit, benefit from the two-per-cent rate cut and see the government shifting some of the tax burden onto the business community after almost a decade of business cuts sends a message of fairness to families.

"I think that was the other thing that's really bugged people about the HST is this sense that business is paying less and families are paying more," she said.

"That's what we're trying to address with these proposed changes."

The government will cancel a corporate income tax cut planned for January 1, 2012, and postpone a proposed small business tax cut slated for April 1, 2012.

The changes to the HST will only occur if British Columbians vote to keep the tax in next month's mail-in referendum.

Residents will be asked if they want to repeal the tax after an unprecedented uproar across the province saw more than 500,000 people sign a petition, triggering B.C.'s unique direct democracy laws that forced the vote.

HST referendum ballots will hit the mail on June 13 and the results are not expected until mid-August. The Liberals, who have almost two years left in their term, are expected to seriously test the election waters after the referendum.

Reaction to the government's HST moves prompted mixed, but generally warm reaction in the business community.

The B.C.-based representatives of the Canadian Taxpayers Federation, Canadian Federation of Independent Business and the Surrey Board of Trade welcomed the changes, saying they help taxpayers and will ultimately stimulate business.

The Business Council of British Columbia, one of the largest business support organizations in the province, endorsed the changes, saying they represent a prudent fiscal approach that provides certainty for business.

The pro-HST Smart Tax Alliance has also called the proposed changes good for families and business.

But the Canadian Federation and Foodservices Association said the HST hits the food service industry with a double whammy, raising the costs of restaurant meals and taxing small businesses.

The B.C. Federation of Labour called Clark's proposed HST changes a desperate attempt by the Liberals to save a massive tax transfer from big business to consumers.

The Opposition New Democrats said they would campaign to kill the tax, despite the government's tweaking.

NDP Leader Adrian Dix, who has repeatedly called on the government to halt business tax cuts, had little to say about Clark's planned business cuts.

Instead, he stuck to his message that British Columbians can't trust the Liberals when it comes to the HST because they introduced the tax without consulting voters.

"They are misleading them (voters) again with another grab-bag of numbers, a grab-bag of gimmicks that may happen at some point in the future in order to convince them that the HST, which is bad for them, is good for them," he said.

Finance Minister Kevin Falcon said NDP allegations that cutting the HST rate to 10 per cent amounts to offer taxpayers a bribe with their own money was "thoughtless and ridiculous."

Falcon said the cuts will be made to the provincial half of the harmonized tax, effectively dropping it to five per cent from seven.

"Fully implemented every family will be better off under a 10 per cent HST than under the previous HST-PST," said Falcon.

Falcon said the government remains committed to balancing its budget by 2013-2014, even though every percentage point the government knocks off the HST costs about $850 million in revenues.

Falcon said more than 275,000 British Columbians participated in a recent series of telephone townhall meetings about the HST and the common theme was people wanted the government to make the tax easier on families.

"The theme was very, very common: Government, deal with the additional impact on families," said Falcon.

He said the public had no interest in the government increasing spending, which could be translated to no wage increases for public sector workers, who have had their wages frozen for two years.