HST costing B.C. families $350 a year

An independent government report on the HST has concluded the majority of British Columbians are paying more at the cash register since the introduction of the HST, but low income families are actually paying less.

But the report says that while many British Columbians are paying more tax now, rolling back the tax and reinstating the old PST would have long term negative effects on the provincial economy.

The report was written by a panel appointed by the provincial government to provide British Columbians with an independent assessment of the costs and benefits of the controversial tax in the lead up to the June referendum.

According to the report British Columbian families pay an average of $350 more every year on routine expenditures under the HST.

"The more you spend, the more HST you pay. The more you earn, the more you're likely to spend," says the report, which was released on Wednesday morning.

"If your family is one of the 15 per cent of B.C. families that report income of less than $10,000 a year, you're actually better off under the HST," it says.

"The HST will also cost you more if you buy a newly built home that is worth more than $525,000."

Taxes shifted to individuals

The report also acknowledged that the HST has shifted the greater share of taxes from business to individuals and families.

"Because more things are taxed than before - including newly built homes - families now pay a total of $1.33 billion more in sales tax after HST rebates and tax breaks are taken into account," it said.

"Businesses will pay about $730 million less in taxes."

But consumers should eventually benefit from lower prices, the report concludes.

"Experience in other jurisdictions shows, over time, competition forces businesses to pass on these HST savings to consumers. If they don't, they lose customers," it said.

"When Canada's Atlantic provinces adopted the HST in 1997, there was an early increase in inflation. It was temporary, however. After looking at the experience of other jurisdictions that adopted value-added taxes such as the HST, our assumption as a panel is 90 per cent of business' HST rebates are passed on to the consumer."

Return to PST/GST would be costly

The report also compared the long term economic benefits of keeping the HST with the economic costs of returning to the PST.

"Virtually all economic analysis finds the HST increases economic growth, productivity, wages and the quality of jobs," it said.

"There is no consensus on the value and timing of those benefits. A move back to the PST/GST will likely have a negative impact on business and investor confidence because of uncertainty over tax policy."

"Going back to the PST can be done - just not overnight. It will take 18-24 months to go back."

"The first year of going back to the PST/ GST will result in the province losing more than half-a-billion dollars in revenue. That revenue gap will increase each year."

"Going back will be expensive. The province will probably have to repay Ottawa the $1.6 billion it received to transition to the HST."

Not revenue neutral

The report also noted that the HST generates more revenue than the PST/GST, despite the government's promise that it would be revenue neutral.

"When the HST was introduced, the government expected in the first year the extra revenues from the HST would be balanced out by tax breaks and rebates," said the report.

"That hasnt happened. The HST is raising more revenue in its first year than was predicted. With each passing year, the HST will continue raising more revenue than the PST/GST system did because it taxes a broader base of goods and services," it said.

"If we go back to the PST/GST, the province would see a sales tax revenue loss of about $820 million in the first year. That loss would increase to $893 million in the second year and would widen each year," it said.

Panel of economic experts

The report was commissioned by the provincial government as part of its educational campaignleading up to the summer referendum.The referendum on the HST will be conducted by mail in June and July.

The panel of four authors included chair Jim Dinning, former treasurer of Alberta, George Morfitt, a former B.C. auditor general and accountant, Tracy Redies, the CEO of Coast Capital Savings and economist, and John Richards, a professor of public policy at SFU and former NDP MLA in Saskatchewan.

"We have gathered the best information we could find to present to you. Well admit Its been a struggle. Some of the facts about the HST and PST/GST are crystal clear. Other facts will take time to emerge. Tax policy is complex and its not always easy to arrive at black and white conclusions," they panel wrote in their introduction.

"The process of preparing this report has shown us much of the debate over the HST and PST/GST remains filled with factually incorrect information. We believe that better information, including the good and the bad about each tax system, is critical for there to be a successful referendum no matter the result."