West Shore voters united with the majority of British Columbians in rejecting the controversial harmonized sales tax in favour of the PST-GST system.
Juan de Fuca voters mailed in 12,600 referendum ballots, with 62.5 per cent saying “yes” to extinguishing the HST. Esquimalt-Royal Roads had 58 per cent in favour of dumping the HST. Overall, 54.7 per cent of British Columbians who voted in the referendum rejected the tax.
West Shore Chamber of Commerce CEO Dan Spinner suspects the referendum results are more a repudiation of how former premier Gordon Campbell brought in the tax, rather than a strong comment on tax policy.
“The referendum was more on (Campbell’s) style of leadership,” Spinner said, noting that the chamber remains neutral on the tax. “The HST was supposed to benefit small businesses, but I think there was always suspicion this was more about Howe Street than Main Street.”
Spinner said the West Shore business community was uniformly divided on the HST, with many in restaurant and new construction opposed, but with wholesalers and many retailers being less impacted.
“This tells the government to be careful how it governs. That if they make public announcements, they need to create a public trust,” he said. “People want the government to put in good tax policy, but more so they want the government to be straight with them.”
The provincial government says the transition back to the five per cent GST and seven per cent PST “with all permanent exemptions,” will take until March 2013. The B.C. government will have to borrow to pay back the $1.6 billion transition fund from the federal government, with a payment schedule that will have to be negotiated with Ottawa.
Esquimalt-Royal Roads MLA Maurine Karagianis (NDP) called the referendum results “a good day for democracy.”
Karagianis said the B.C. Liberal government’s expectations of a difficult transition back to the old tax are overblown. The province can work a repayment plan with the feds for the $1.6 billion in HST transition funding, she said.
“The government kept the (2009) deficit hidden and would have had to borrow money at any rate, probably from the feds,” Karagianis said. “I don’t see the transfer funds as being a big boogeyman.”
Campbell announced the 12 per cent tax in July 2009, not long after a provincial election and in the wake of the world economic recession. Former premier Bill Vander Zalm quickly launched a grassroots anti-HST crusade that gathered enough voter signatures to trigger the referendum, and quash the tax.
"It wasn't a difficult sell," added John Horgan, MLA for Juan de Fuca. "The government's effort to soften the blow was unsuccessful. They couldn't gloss over the transfer from consumer's wallets to corporations.
"In our area, in Langford, Metchosin and Sooke, people weren't prepared to accept that."
Horgan said the 18-month transition period is excessive – he pointed out the HST was brought in within a year from its announcement. "That's an enormous amount of uncertainty for the economy," he said. "Why would anyone make a major purchase now when it will be HST exempt down the road?
An independent panel that analyzed ramifications of the HST predicted families would pay $1.33 billion more in sales tax and businesses will pay about $730 million less in tax in 2011-12. The panel said the HST would have a net benefit to the economy and moving back to the old system would have negative economic consequences.
“I think the original stop-HST movement took us all by surprise,” Karagianis said. “It was a big surprise to see hundreds of thousands of people reject the Liberal’s HST plan because of the way it was brought in.
“The referendum is a good sign people are paying attention and were deeply offended. It’s a great day for B.C.”
"This tax became a symbol for the government thinking it is right," Horgan said. "Had they recognized a year and a half ago the public didn't want this, it would have saved a lot of grief and a lot of money. There's not a lot of support for B.C. Liberals these days, and this tax is a large reason why."
To buy or not to buy a new home?
The introduction of the HST more than a year ago threw a confusing wrench into construction and new housing projects, and the retraction of the tax is expected to do the same.
Jim Hartshorne, president of the West Shore Developers Association, said he hopes the government clarifies rules around the 18-month or more transition period as soon as possible.
HST added seven per cent to new home purchases, although federal and provincial rebates offset some of that increase. Under HST, new homes priced less than $525,000 paid less tax than under PST-GST due to government grants.
Hartshorne said most developers absorbed the added HST and "took the hit to take away the uncertainty." The transition back to GST-PST could sow confusion among people who have bought homes in the past year and those who are buying homes now.
“We’re happy the uncertainly around the tax is clarified,” Hartshorne said. “The sooner they can clarify how (the transition) will work the better it will be for all.
“It’s a big concern. A lot of people in the development industry don’t know how they are going to go from HST back to PST now.”
Spinner said people might hold back on buying a house, but he suspects it will be a minor blip for the construction industry in the longer term. “The closer we get to the end of 18 months, it's possible people might wait,” he said.
--with files from Tom Fletcher
editor@goldstreamgazette.com