Do the people leading the charge against harmonizing the sales taxes of B.C. and Ontario with the federal GST imagine this is the first time such a reform has been introduced? Do they suppose the public does?
It would be one thing to attempt to whip the population into hysterics against a “risky, untried scheme” that had never been implemented elsewhere. It would be tiresome—essentially an endorsement of the doctrine that Nothing Should Ever be Done for the First Time—but it would at least be coherent, as demagoguery goes.
But the forces arrayed against the plans to convert the two provinces’ existing sales taxes next July into a broader, GST-style value-added tax—a ragtag army of special interests and opposition parties that includes the federal NDP and the National Citizens Coalition, the Ontario NDP and the Ontario Progressive Conservatives, the B.C. NDP and Bill Vander Zalm—must confront the troublesome fact that four provinces (Quebec, Nova Scotia, Newfoundland and New Brunswick) have already done so, without ill effect. And not only them: at last count, 143 countries around the world had implemented similar value-added tax regimes. Not one of them has renounced them.
Likewise, a campaign that railed against sales taxes of any kind, on the grounds that they are regressive, complex, etc., would have a certain coherence to it. If the opposition were proposing to abolish the provincial sales tax, they would at least be in an honourable political tradition, even if they would have to explain where else to find the revenue it raises. But that is not their position.
Rather, the proposition they seek to uphold is this: that the two provinces should continue to tax some goods and services, but not others; that the tax should apply, where it does apply, at wildly uneven rates, depending on how many times it has been imposed at various stages in the production chain from raw input to finished good; and last, that we should, through the combined operation of two separate and uncoordinated sales taxes, federal and provincial, each with their own set of exemptions, in effect maintain four different regimes in each province, depending on which of the two taxes applies in any given case: both GST and PST, GST but no PST, PST but no GST, and neither GST nor PST.
That, stripped of its rhetoric, is what the opposition amounts to: a numb devotion to the status quo, no matter how grotesque; and an appeal to the ignorant fear that any change must, by definition, make things worse. But change in this case amounts only to unwinding the worst features of the current regime. In brief, a harmonized sales tax (HST) amounts to three things:
One, broadening the existing provincial sales tax to cover the same broad range of goods and services as the GST. (Or nearly so: both provincial governments have announced exemptions to a select list of politically sensitive products, such as coffee (!), newspapers, tampons, and children’s clothing.)
Two, rebating the tax paid on business inputs, as with the GST, so that only the tax on a business’s “value added” (the difference between what it charges its customers and what it paid its suppliers) gets passed on to the next stage of production. This ensures the final consumer only pays the tax once, and at a single rate.
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