By Paul Willcocks, Times Colonist November 18, 2009

It was a dramatic tale of two different approaches to governing this week.

In Ontario, the government introduced HST legislation Monday, setting out the details of the new tax that will take effect July 1, 2010, as it will here.

The plans include other big tax cuts and a promise that the total government tax take will fall by $7.7 billion over the next four years. Families will get a $1,000 rebate to cover the added costs. Seminars are already underway around the province for businesses.

In B.C., the legislation won’t be introduced until next spring. The government acknowledges families will face higher taxes, with much smaller offsetting reductions.

And poor Finance Minister Colin Hansen couldn’t even say Monday whether school districts would get funding to cover some $40 million in extra costs because of the harmonized sales tax.

Two governments, heading in the same direction, but in very different ways.

Both know voters will find the new tax tough to swallow. Only Ontario is making much of an effort to win them over.

You could argue that the Liberal government in Ontario is buying support with other tax cuts. This week, it announced HST exemptions for fast food under $4 and newspapers. But seminars on the new tax for small business, in their communities, are simply a sign of good, competent government. Clear rules well in advance of implementation help everyone.

The Campbell government is looking inept, or indifferent, in comparison.

That’s not good. During the May election campaign, the Liberals promised, in writing, not to introduce the HST — and then did just that. Hansen’s claim the tax was “not even on the radar” during the campaign makes the decision to introduce it a few weeks later look reckless and ill-considered.

Here’s the primer on the HST. It’s a new tax that will combine the seven-per-cent provincial sales tax and the five-per-cent GST. For many items, adult clothing, for example, there is no net change.

But the GST applies to more things than the provincial sales tax. The provincial government introduced exemptions, like no PST on bicycles to promote health. Services, like cable or child care, attracted GST but not the provincial tax.

Under the harmonized tax, the GST rules take precedence. A lot more things will be taxed.

The GST also lets businesses deduct the sales tax they pay for inputs. Treating the PST the same way will save B.C. businesses about $1.9 billion. Individuals and families will pay more to offset the business tax break.

The theory is that companies will pass the benefits on in lower prices and B.C. will be more attractive for businesses investors because of lower tax costs.

The provincial government has not been forthcoming with information on what it means for families.

But TD Economics, the analytical arm of the big bank, has released a special report on the tax that offers a useful starting point.

Individuals and families will pay more, the report concludes, as “the tax burden will shift from businesses to consumers.”

The TD Economics analysis estimates about 20 per cent of British Columbians’ expenditures will now face an additional seven-per-cent tax.

An average household will pay an extra $840 in taxes. The analysis also projects that businesses will pass on some of the savings from reduced taxes to consumers. That will cut the actual net increase in costs to $400.

The TD Economics report favours the harmonized tax.

It’s more efficient, it says, and will help Canadian businesses compete for domestic and international markets, the report said.

And the B.C. government continues to cite the need to offer tax breaks to the forest industry and other big businesses.

But as the legislature finance committee found in its budget consultations, the public isn’t buying it. The HST remains unpopular; most submissions said it should not be introduced.

Ontario’s government faces the same backlash. But it’s doing much more to inform people and try to win them over.

Footnote: The TD Economics report says the tax will add about 0.7 per cent to the rate of inflation in the province, as the costs of consumer goods and services rise. The report is available at td.com/economics.

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