HST foes jumping for joy but others predict trouble ahead
Published Friday, August 26, 2011 3:56PM PDT
Those in the restaurant and fitness industries are breathing a sigh of relief after learning that B.C. voters turned down the HST, but business leaders warn the results will hurt the province's economy.
Since the harmonized sales tax came into effect last year, restaurateurs across the province have moaned that consumers were staying at home to avoid seeing an extra five-per-cent fee on their tabs. Under the old system, things like eating out, joining a gym and buying a new bike were exempt from the PST.
The Canadian Restaurant and Foodservices Association applauded B.C. voters Friday for rejecting the 12-per-cent HST.
"After months of tax policy uncertainty, our members welcome the certainty and food tax fairness that comes with the HST decision," CFRA Vice President Mark von Schellwitz said in a release.
The association said the HST created an "unlevel playing field" for those in the food industry, with restaurant meals taxed differently from those prepared at home.
The end of the tax also brought a smile to the face of Vancouver fitness guru Ron Zalko, who said that charging HST on gym memberships punished people who are trying to live healthier lives.
"I'm very happy. They made my day today," he told CTV News, performing a round of jumping jacks to express his jubilation.
"Any type of activity for exercise should be exempt from the HST, because if you are encouraging people to exercise, that will take the burden off the healthcare system."
Simon Coutts of Simon's Bike Shop in Vancouver said his sales dropped "drastically" when he had to start charging the new tax.
"Now that I've heard that it's going back to the old way, I think it's fantastic," he said.
"It'll probably encourage a lot more people to purchase the bikes again."
Finance Minister Kevin Falcon has promised that when the PST returns in 18 months, it will not be charged on things that were previously exempt, including restaurant meals, haircuts, bikes and gym memberships.
Organized labour across the province also applauded the results of the vote. The BC Federation of Labour called the decision a defeat for the "politics of fear."
President Jim Sinclair said the tax unfairly shifted a $2-billion annual burden from large corporations to ordinary people.
"[Christy] Clark and the BC Liberals have repeatedly cut taxes for businesses and wealthy individuals over the last decade, while imposing regressive taxes and service cuts on working people. The HST was the last straw, and British Columbians rose up and said: ‘Enough is enough,'" Sinclair said.
Vote results could hurt economy, movie industry
On the other side of the HST fight, economists and business leaders have long argued that the tax simply makes sense for commerce, and contended that the savings for big business would stimulate the economy and eventually trickle down to consumers.
Greg D'Avignon, president of the Business Council of BC, said he respects the public's decision but can't help feeling let down.
"We are unquestionably disappointed but don't have the luxury in today's uncertain times to revisit the past," he said in a release.
The council says that losing the HST will strike a serious blow to the competitiveness of the B.C. economy.
"Unfortunately, businesses and government will face direct and indirect costs and lost revenues in the billions of dollars as the province shifts back to an inefficient and cumbersome retail sales tax," council Vice President Jack Finlayson said.
"These costs will fall on companies, taxpayers and households. This change poses a risk to the province's reputation as a stable jurisdiction in which to do business."
One industry that lobbied hard to keep the HST was the film business. Peter Leitch, chairman of the Motion Picture Production Industry Association of B.C., said he worries that Ontario will now have an advantage in attracting projects from south of the border.
"They may be the first ones to go down to Los Angeles and talk about how they've got a better tax structure than we've got in British Columbia," he said.
"I think it's going to cost us some jobs."
The Vancouver Board of Trade was also disappointed with the referendum results, but said the government should take the opportunity to "clean up ambiguities" in how the PST is applied.
Results are a lesson in democracy: taxpayer advocates
Even if losing the HST turns out to be bad for the economy, the Canadian Taxpayers Federation says that the key lesson the Liberals should take away from the referendum is that voters need to be consulted on big decisions.
"Nothing holds politicians to account like citizen involvement," the CTF's B.C. director Jordan Bateman said.
"Citizens do not want to be spectators in the political process. We want our voice to be heard, and this summer, it was -- loud and clear."
The federation says the government's priority now should be coming up with a plan for shifting back to the PST that focuses on balancing the budget.