British Columbia will cut its harmonized sales tax by two percentage points in an effort to win a referendum on whether to keep the levy.
Finance Minister Kevin Falcon says if voters in the mail-in referendum decide to keep the HST, it will become 10 per cent by July 1, 2014, down from the current 12 per cent.
Falcon says the cuts will be made to the provincial half of the harmonized tax, effectively dropping it to five per cent from seven.
Another sweetener is a pledge to issue one-time cheques this year of $175 to families for every child under 18 and to low- and modest-income seniors.
The government is attempting to make up for the extra $350 an independent report concluded families would pay each year as a result of the province's decision to switch to the harmonized tax.
"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, and every percentage point the government knocks off the HST costs about $850 million in revenues.
That means the money must be made up somewhere else, and to defray the cost, 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 rebalancing issue is one of fairness," he said. "It's about being prudent and reasonable and about what we can do. I'm not saying I can fix every problem."
If voters reject the HST in the referendum, then the provincial sales tax will stay at 12 per cent, Falcon said, explaining that the government would be losing the efficiencies and revenue that the HST provides so could not afford the lower PST.
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.
