Bend Over, Harmonized Sales Tax Coming

Last modified on July 23rd, 2009

British Columbia just announced that they are going to be switching to a harmonized sales tax model in July of next year. Basically, instead of having a provincial sales tax (PST) of 7%, and a goods and services tax (GST) of 5%, they are going to have one combined tax, a harmonized sales tax (HST) of 12%.

I’m no economist, but that seems like a pretty bad idea. Here’s a quote from the official release:

This is the single biggest thing we can do to improve B.C.’s economy,” said Premier Gordon Campbell. “This is an essential step to make our businesses more competitive, encourage billions of dollars in new investment, lower costs on productivity and reduce administrative costs to B.C. taxpayers and businesses. Most importantly, this will create jobs and generate long-term economic growth that will in turn generate more revenue to sustain and improve crucial public services.”

Huh? How does it create jobs? Maybe it’ll create more government jobs, since they’ll be swimming in a bit more cash, but I don’t really see how it helps most people. In fact, if anything the consumer gets hurt more here, since they’ll probably start paying 12% tax on some items that used to cost 5% or 7%. And if the plan is to implement some kind of point-of-sale rebate system, I think that will completely defeat the purpose of trying to lower administrative costs. I know as a web company we’re not required to charge PST on some items, so effectively most of our invoices only contain GST — with the new system, we’ll probably have to charge 12% HST on most items.

Here’s another great quote:

B.C. will have the lowest Harmonized Sales Tax (HST) in Canada, by combining the seven per cent B.C. Provincial Sales Tax (PST) with the five per cent federal Goods and Services Tax (GST), for a single sales tax rate of 12 per cent. All other provinces with an HST, and the one proposed by Ontario, have a rate of 13 per cent.

So, only a few provinces have an HST, and yes, BC will probably have the lowest HST value in the country. But it’s far from the lowest tax rate in the provinces. I mean, Alberta doesn’t pay any PST, so if you really want to compare apples to apples, you’d have to say that an HST implementation in Alberta would only be 5%, much lower than BC’s HST rate of 12%. I mean, it’s kind of like sliding all your toys under the bed and then telling your mom that you cleaned your room.

It’s estimated the HST will remove over $2 billion in costs for B.C. businesses.

Maybe, but I bet it’ll transfer over $2 billion in costs to B.C. consumers.

That includes an estimated $1.9 billion of sales tax removed from business inputs, which enhances competitiveness, increases investment and productivity and, ultimately, increases prosperity.

It’ll increase prosperity? Wow, that’s some economic outlook.

Anyways, I’d be curious to hear some thoughts from people obviously more knowledgeable in the field of economics than I am.

19 responses to “Bend Over, Harmonized Sales Tax Coming”

  1. Trevoro says:

    There’s definitely an incentive for businesses in that it relieves some administrative burden, but it eliminates any PST exemptions, and would probably cost individual families more. I can’t remember whether or not it applies in BC, but in Ontario if you bought a house after the HST implementation you got taxed on the entire thing, rather than just the PST. That’s a hell of a lot more money. In BC housing costs are incredibly high already, so I’m interested in seeing what they plan on doing with that money.

  2. Tom says:

    What about buying a vehicle privately. Now you pay PST when you get your plate and no GST. Will you now have to pay a full 12% HST?

  3. VancityAllie says:

    I’m so confused. How is anything that hurts the consumer good for business? This isn’t going to do anything to stimulate the economy if you’re passing along costs to the consumer.

  4. Dave says:

    I suppose it depends on where you’re incorporated what you would have to charge. In Ontario next year we’re also harmonizing so here we’ll have a 13% tax (8% PST plus 5% GST), so if you’re actually incorporated here it’ll be 13% you’ll have to charge.

    Craziness all around.

  5. John says:

    I’m going to weigh in and drop the “don’t jump to so many conclusions based on a single press release” card here.

    A couple of paragraphs in a press release does not tell the full story.

    I’m not saying that your conclusions are (or will be) wrong, just that they may be premature…and in typical social media style, in some cases, hugely over-reactive without all the information.

  6. John says:

    To clarify, I don’t think Duane is over-reacting, possibly making a few leaps based on what little information is out there but in general, things like this get blown way out of proportion on Twitter with most people only reading the headline and not even the article it’s based on.

  7. Duane Storey says:

    Well, I mean, given that the decision has already been made to move to the HST model here, and obviously people don’t really understand it (that press release contains a lot of political rhetoric), don’t you think we’re past the point of being a bit premature about it?

    Democratic governments are supposed to represent their constituents to a large degree — doesn’t sound like there was much input, if any, from them for this decision.

  8. Tawcan says:

    I would like some explaination from the press/government on how exactly this new tax system saves business $2 billion each year.

    5% GST + 7% PST = 12% tax
    12% HST = 12 % tax


    Sounds like there will be exceptions to the HST so not everything will be taxed at 12%.

  9. Duane Storey says:

    With the current system, many items (such as food and essentials, such as health-related products) aren’t taxed GST. With the new system, it seems likely that more things will be charged at 12%,

  10. Dan Udey says:

    I’m with John on this one. We just don’t have any details, other than what they’ve planned out. We do know that it’ll save businesses having to mess around with submitting different taxes to different organizations (with their different rules, tax rates, etc.), and it’ll save the BC government having to administer sales tax at all.

    I spent a few years living in the maritimes where they’ve had HST for quite a while, and I can attest to it being a simpler system for consumers (and tourists) to understand, but I can also assert that a great many things which weren’t provincially (or federally) taxable aren’t charged the full 15%. Prices haven’t shot up, businesses haven’t gone bankrupt, and the world hasn’t come to an end.

    Let’s hold off the wild, unabashed panic until we actually get more details from the government on how they’re going to administer things, and how the process is going to work.

  11. John says:

    I just think you’re making assumptions about how it will be applied, who will be collecting it, what products & services may be except, etc.

    A lack of information always creates a flurry of misunderstanding. Until the government clearly outlines what is involved with this, I’m going to reserve judgment.

    It seems to be something other provinces are already doing or are moving to, so if it’s purely a tax grab, it will be obvious. My point is that at this point it’s not clear.

  12. Duane Storey says:

    Point taken, but I stand by my opinion.

    And Dan, it’s not “wild, unabashed panic”, it’s my opinion based on the information provided to date. I can hardly be blamed that the information is totally lacking, or that a decision that will affect pretty much every person in BC has been made without any foreknowledge of the plan or the implications of it. And just because there haven’t been repercussions in other provinces doesn’t automatically imply it’s worth doing.

  13. John says:

    One issue that is worth mentioning is that while it’s expected to “save businesses $2 Billion”, I’d curious to know how much it’s going to cost businesses to make the switch to one tax on their cash registers and computer systems…I seem to recall the GST changes were a huge cost issue as many businesses had to get new systems or pay for costly software upgrades to support the changes.

    Just think of all those new point of sale stickers that will have to be printed and distributed.

  14. Duane Storey says:

    That’s a good point. As a business owner, I don’t really seem the burden of having two taxes at this point. They are two line items on the invoice, and ultimately end up in two areas of the ledger, but other than submitting them, it’s not really a big headache. I imagine in retail it’s far worse, but I agree, transitioning to a new system may not be cheap or easy.

  15. Dan Udey says:

    Sorry Duane, the ‘unabashed panic’ comment was referring to the people who seem to think this is the end of life as we know it, as though the government is going to reach into our wallets and take every dime we have…

  16. Duncan says:

    From what I gather, they will now charge 12% on items where in the past only one tax applied! There may be some sort of “credit” or exception put in place, however that would totally defeat the supposed purpose of Harmonizing in the fist place (to save costs). Bottom Line: The Olympics are expensive and the excess spending on the infrastructure and hosting needs to be paid for. American and other Tourism is down in BC, so guess who’s pockets they’re picking? Fight back. Shop in the USA. Strong dollar, lower prices. I always try to gas up in the US to avoid paying Gordo’s bogus Carbon tax BS. Just my 2 cents.

  17. Duncan says:

    Check out my latest blog with FAQ’s on the new HST based on my research and chat with my accountant.

  18. Lindsey says:


    Hi, I’m Lindsey and I’m your monitor for the Blogathon! Good luck!
    You can reach me here as kteachone on Twitter,, or fuzzy_on_details on Yahoo messenger. Let me know if I can help!

  19. Lloyd Budd says:

    John, Dan, you guys sorta come across as government apologists.

    Instead of spinning it, a healthy government would give it’s citizens the whole picture — the good and the bad.

    Some one will have to pay for it, particularly as it “boost investment, job creation”, and I can’t help, but think it’s timing relative to the costly Olympics is no coincidence.

Leave a Reply

Your email address will not be published. Required fields are marked *