The claim of HST supporters is that large tax savings enable businesses to lower prices. We can examine one example. Taseko Mines Limited operates Gibraltar Mine, near Williams Lake, the second largest open-pit mine in Canada. Taseko, like other manufacturers had already been relieved of paying provincial sales tax on production equipment but they still paid the tax on legal fees, liquor, limo repairs, office chairs, copy paper, brooms and other payments. Under HST, Taseko now gets back all that money previously paid as provincial sales tax. That has allowed them an opportunity to lower prices. Not required them to lower prices, but given them the opportunity. They said no.
This chart shows a six month recap of copper prices spanning the time when HST was made effective:
Clearly, producers selling at world prices don't pass through tax savings, they earn more profits. The price of oil in BC didn't fall because Shell Oil and others paid no sales taxes to Victoria.
A McDonald's Big Mac is $4.19 in St. John's Newfoundland where the restaurant pays starting wages of $10.25 per hour. In Vancouver, where McDonald's pays starting wages of $6.75 an hour, the Big Mac is the same $4.19. Strange. Don't lower costs mean lower prices?
- Canadian Mazda dealer, price $199
- KeylessRide, American based provider of remotes, price $39
Notice that economists and lobbyists are quick to promote policies that assist big businesses but almost never talk about the need for more effective competition in the markets. The Fraser Institute believes that every economic decision should be market-based but they don't publish papers about improving competition. Their belief is in markets free of government regulation, not free of monopolies. Recommend this post