By Justine Hunter – January 14, 2010

The B.C. government has retreated – again – on the incoming harmonized sales tax, promising an estimated $235-million worth of rebates to public schools and hospitals.

Finance minister Colin Hansen announced the policy change yesterday, two months after he gave up $80-million worth of tax income to the new home construction sector.

At that time, he suggested the chances of further tax breaks on the HST were unlikely given the province’s record deficit. Yesterday, he said he has always intended to work out some kind of relief for the province’s publicly-funded institutions, which also includes universities and colleges.

“The reason we held off in terms of these organizations is that we seriously looked at two options,” he said. It was either a rebate scheme similar to the one for the federal Goods and Services Tax, or a direct cash transfer to supplement education, post-secondary and health care budgets. In the end, he said, the easiest move was to allow the sectors to apply for special HST rebates in conjunction with their GST rebates.

Last summer, Mr. Hansen announced that B.C. will adopt the HST in July of this year, combining the five per cent GST with the province’s seven per cent sales tax. He’s already offered rebates to municipalities and charities.

The new rebates are designed to ensure that health and education institutions won’t pay any additional tax as a result of the move to the HST, which spells higher taxes on services and some goods that are currently exempt from the provincial sales tax.

School authorities reacted with relief yesterday. Even last month, trustees wrote to Mr. Hansen warning that the tax change would add $32-million each year to education costs. “The additional impact of the HST will require even greater cuts to education services,” warned Connie Denesiuk, president of the B.C. School Trustees’ Association in a Dec. 8 letter.

“This is the certainty we’ve been looking for,” she said yesterday.

“We were unofficially told there would probably be something, but when you are drafting a budget you have to have real numbers, you can’t make mistakes or you risk having to disrupt a program half-way through.”

School boards are just starting to prepare their budgets for the school year that starts in September and even after this change, they are still facing a shortfall of about $230-million, she added.

The B.C. New Democratic Party opposition has lobbied to scrap the HST entirely, and dismissed yesterday’s rebates as a “piecemeal” effort that does won’t satisfy voters.

“The B.C. Liberals are trying to appease British Columbians with one-off rebates. But that’s just not going to cut it. The B.C. Liberals lied about the HST, and British Columbians are overwhelmingly opposed to this tax,” said New Democrat finance critic Bruce Ralston in a news release.

The B.C. Liberal party stated during the spring election campaign it was not planning to adopt the tax. After the election, in the face of collapsing revenues, Mr. Hansen said he concluded B.C. would benefit from the shift, which will bring $1.6-billion in transfers from the federal government.

Meanwhile, restaurant and bar owners are still campaigning against the tax, but Mr. Hansen maintained yesterday he is not considering any exemptions for the hospitality industry.

“They seem to have made a decision that rather than mitigate that they are embarking on a campaign to try to have the restaurant sector exempted,” Mr. Hansen said. “I’ve told them that it is technically just not possible.”

[Globe & Mail]