As the debate rages in BC about the Harmonized Sales Tax, one curious dimension I’ve been puzzling over is this––why do the Feds want the HST implemented so badly that they are willing to fork over $1.6 billion to the province as an enticement?
And it isn’t just the federal Conservatives. Ever since the introduction of the GST, successive Conservative and Liberal federal governments have been pressuring the provinces to harmonize their provincial sales taxes with the GST. Why?
At one level, there is the explanation that harmonization will simplify the sales tax system, allowing businesses to submit only one set of remittances. But I think the real reason is more substantial.
Ever since the original Free Trade Agreement with the US was instituted, the federal government has really had only one core economic development strategy – boosting exports. We have no meaningful industrial strategy. Our federal governments have not had a real vision for the role of government in economic development, strategic procurement, or the nurturing of new sectors. Rather, all the economic eggs have been in one basket –– free trade and export promotion.
Understood through this lens, pushing both the GST and the HST make perfect sense. These moves towards a value-added sales tax mean that Canadian exporters are spared these taxes (at the expense of Canadian consumers), as exporters can get rebates for any sales tax they pay on inputs. So, these taxes will make Canadian and BC exporters more “competitive.”
All of which raises a much more fundamental question: do we really want to hinge all our economic development goals on exports? As we seek to get serious about confronting the climate challenge (and if Jeff Rubin is correct that rising oil prices mean “our world is about to get a whole lot smaller”), does it really make sense to structure our economic and taxation policies around the goal of export promotion? My guess: The era of ever-increasing trade and tourism will soon be coming to a close. We need a new economic plan.
For analysis of the HST by CCPA-BC senior economist Marc Lee, see here
Norman Farrell // Oct 8, 2009 at 11:11 am
I don’t dispute what Seth Klein writes. I agree but I would emphasize the trend in many areas, at each government level, to utilize regressive tax measures so that tax burdens are shifted more substantially to the lower and middle classes. This is driven by the agencies hired by those who benefit.
I explore the issue of regressive taxes here:
http://northerninsights.blogspot.com/2009/10/compounding-regressivity.html
stephen elliott-buckley // Oct 22, 2009 at 1:24 am
My money’s been on Jeff Rubin for a long time now.
It’s all about bioregions now.
Darleen // Dec 9, 2009 at 2:07 pm
The HST, is a joke on the citizens of Canada. We have governing officials, who are making up the rules for people living in poverty. Most of these people have less to live on than, a politicians booze bill. It is our governments failure to keep corruption from destroying this country. The corruption payroll is getting to the point where, the little guy, can’t keep up with those corruption costs. Government officials, need to roll back their salary’s , by 40%, they need to reduce their numbers, by 40%. Governing officials expenses, are outrageous, that needs to be cut by 60%. Big corporations, need to be taxed by 30% off the top. Our teachers declined a raise they were entitled to, they thought of their students and each other first. They deserve a lot of praise from the citizens, for recognition, for the raise in pay, they will do without.