Taxation: HST makes strange alliances

Ontario's and B.C.'s plans to adopt the HST are producing some strange alliances.

Despite what it may have looked like, British Columbia wasn’t overrun by tax-hating Republicans in late August. Still, the scene resembled something you might see on CNN — hundreds of irate people waving placards, angry about their government’s decision to harmonize the GST and PST. It was a strange sight. Canadians aren’t known for virulent anti-tax demonstrations. But then again, much about the HST debate has been unusual.

As B.C. residents take to the streets, politicians in Ottawa, Toronto and Vancouver are going to war over the Harmonized Sales Tax — due for adoption in B.C. and Ontario next July — and it’s making for some odd bedfellows. On one side are Conservatives Stephen Harper and Jim Flaherty, the tax’s original proponents, standing in solidarity with Ontario’s Liberal premier, Dalton McGuinty. The province’s Conservatives, however, are vehemently opposed. “It’s crazy to do it in a recession,” says Tim Hudak, the party’s new leader.

Liberals aren’t immune to the infighting. Until recently, Michael Ignatieff took a strong stance against the HST, calling it the “Harper Sales Tax,” even as McGuinty was forging ahead. While the focus of the opposition’s anti-tax comments has generally been the party in power, Graham White, a professor of politics at the University of Toronto, says, “If you got the two Conservative parties in the same room, there would probably be some sort of cage match.”

In B.C., anger over the tax has even pulled one of the province’s long-forgotten characters back into the spotlight. Bill Vander Zalm, the offbeat ex-premier and former leader of the right-wing Social Credit party, has mostly lain low since he left office in 1991 — he now grows lilacs — but he’s been leading protests, saying the HST is a “cruel tax.” He’s in cahoots with CaroleJames, leader of the provincial NDP party. There’s no chance this coupling of left and right would have taken place while Vander Zalm was in power.

It’s business leaders who are, for the most part, staying quiet. Save for a few sectors, they want the new tax. Essentially, companies won’t have to pay PST anymore on things they need for production (these “input” costs are HST exempt), so they should save about $2 billion a year. Perrin Beatty, head of the Canadian Chamber of Commerce, gets why consumers are worried, though — they don’t understand the tax. “It’s our responsibility to explain why it’s a net plus,” he says. “And government has to be more transparent.”

Despite the squabbling, there’s no doubt the HST will be introduced as planned. Ontario and B.C. need the billions of dollars they’ll receive from the feds if they support it, and Ignatieff has resolved his differences with McGuinty, saying that he’d “live up to the commitments that are made by previous governments.” It’s also unlikely the Ontario Conservatives will repeal such a pro-business policy if they win the next election: Hudak hasn’t said they won’t rescind the HST but, picking his fights carefully, he’s steered well clear of saying that they will.