Under the harmonized tax regime, announced Thursday by the provincial government, the five-per-cent federal goods and services tax will be combined with the province’s seven-per-cent provincial sales tax into a 12-per-cent harmonized tax.
The added costs to consumers will come from the fact the new tax will apply to the same goods and services that the GST applies to, and that includes many items that were not subject to PST.
For example, restaurant meals, excluding alcohol, have not been subject to PST, but will be subject to the new HST. So, too, will the purchase of such things as bicycles, school supplies and non-prescription medicines.
So the new tax will “put our businesses on a level playing field with their international competitors,” Premier Gordon Campbell told reporters when announcing the adoption of the HST.
“We do believe when our industries are on a level playing field they compete better and they win more,” Campbell said. “And that makes B.C. stronger.”
The federal government will provide $1.6 billion to the province for adopting the new harmonized tax, money that will “help with our fiscal challenges,” the premier said. Earlier this month, the government announced that it expected this year’s deficit would be greater than the $495 million originally forecast.
The B.C. Business Council was one of the many organizations that lobbied for a harmonized tax.
“We think it’s going to be very good for the provincial economy over the long term,” the council’s executive vice-president of policy, Jock Finlayson, said in a voice-mail message.
The harmonized tax should attract new investment into the province and lead to higher productivity and higher wages, Finlayson said. And that will be good for the province. “It does represent a net shift of the consumption tax burden from intermediate production onto final consumption,” Finlayson said. “But after all, that’s what a consumption tax is supposed to do.”
The following goods and services are currently exempt from provincial sales tax (PST), but will be subject to the full 12-per-cent harmonized sales tax when it is implemented next July. With the new HST, businesses will be able to recover the PST portion of the tax they currently pay, rather than passing it on to consumers as part of the price of these items. Theoretically, that should mean that prices for these goods will come down by seven per cent as they become subject to the full tax.
• Residential fuels (electricity, natural gas) and heating.
• Basic cable TV and residential phones.
• All food products (only basic groceries will remain exempt under new tax).
• Non-prescription medication.
• Vitamins and dietary supplements.
• School supplies (books will continue to be exempt).
• Magazines and newspapers.
• Work-related safety equipment.
• Safety helmets, life jackets, first-aid kits.
• Smoke detectors and fire extinguishers.
• Energy conservation equipment (e.g., insulation, solar power equipment).
• Personal services such as hair care.
• Dry cleaning.
• Repair services for household appliances.
• Household maintenance such as renovations and painting.
• Real estate fees.
• Membership fees for health clubs.
• Movie and theatre tickets.
• Funeral services.
• Professional services such as accounting and home care.
Source: B.C. Ministry of Finance