"Premier Gordon Campbell and Finance Minister Colin Hansen announced the change in Vancouver Thursday, presenting it as a revenue-neutral way to simplify the system for business and encourage new investment.Of course, Campbell and Hansen spoke from extensive briefing notes prepared by the vast squad of minions employed by the Premier's Office and the Ministry of Finance. The statement that HST would be revenue neutral was a well considered element of the presentation.
"...Hansen said the implementation will result in a drop in revenues to the province initially, moving to a slight net increase in later years.
We now can examine the correctness of the assertion. Since the politicians had unlimited resources to consider HST effects, they should have been reasonably accurate about the resulting revenue changes. If the numbers were close, say within a couple hundred millions of dollars, they might earn a pass. If the numbers show a distinctly different result, then either Campbell and Hansen and support staff were thoroughly incompetent or they were flat-out liars.
According to public accounts for the fiscal year ended March 31 2010, provincial sales tax revenue was $4.76 billion. In fiscal 2011, with nine months of HST, sales tax revenue was $5.51 billion. Rather than dropping as Colin Hansen predicted, it was up more than $700 million.
A year later in 2012, HST was $5.64 billion, an increase of 18%, almost $900 million from 2010.
Of course, one other factor to consider is tax incidence, the effect of a particular tax on the distribution of economic welfare. We were told that, by moving to HST, businesses in British Columbia would save about $2 billion a year. Since HST actually brings in substantially more money and business was largely relieved from paying the tax, the policy move added almost $3 billion a year to the tax burden of consumers. Because of ineffective competition laws, consumers are already paying prices substantially higher than paid by southern neighbours. The combination effect is considerable.
No wonder people say that BC Liberals provide a business friendly environment.
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