Task-force report may be ignored again
Contentious recommendations include replacing provincial sales tax with new value-added tax
VICTORIA — A task force that the B.C. government already ignored once when it replaced medical services plan premiums earlier this year has produced a second report full of other tax-reform proposals the province appears ready to disregard as well.
The province should tax all non-alcoholic beverages (except non-carbonated water and unflavoured milk), eliminate the homeowner-grant program and replace the provincial sales tax with a new value-added tax similar to the harmonized sales tax, concluded the task force in a final report released Thursday.
The contentious ideas appeared to meet with indifference by Finance Minister Carole James, who issued a statement that simply thanked the task force for its work.
“It will be no surprise that a return to the HST is not on the table, and we are not considering a tax on sugary drinks or changes to the Home Owner Grant at this time,” the Finance Ministry said in a statement.
The task force, made up of two academics and former NDP finance minister Paul Ramsey, cost taxpayers $100,000. It was originally asked by James to investigate how to make up the more than $2.5 billion annually in MSP premiums, which the NDP had promised to phase out within four years.
The task force issued an interim report Feb. 1, advising against replacing the MSP with a full-blown employer payroll tax because it would damage business competitiveness. But the Feb. 20 budget ignored the advice and implemented an Employer Health Tax anyway.
The task force pivoted to analyze improvements to B.C.’s overall tax system in its final report, which was given to government in March, but only released by the Finance Ministry Thursday.
The task force recommended scrapping the province’s homeowner-grant program, which currently provides $570 a year to homeowners to reduce property taxes in Metro Vancouver, because it’s “inconsistent with the principles of progressivity, administrative efficiency and fairness.”
The members suggested a new homeowner and renter tax-credit program that would be based on income and phased out for high-earners.
Sugary beverages should also cost more, recommended the task force. The government could generate $120 million a year if it applied the PST to non-alcoholic beverages, which would have the added health benefit of raising the cost of unhealthy drinks and reduce their usage. The only exempted drinks would be water that isn’t carbonated and milk that isn’t flavoured, suggested the task force.
One of the more controversial ideas in the report was to replace the PST with a more efficient value-added tax, similar to the HST. The HST forced the resignation of Premier Gordon Campbell and was rejected by the public in a 2011 referendum amid concerns that it downloaded increased costs from businesses on to consumers for common household items.
“We recognize the difficulty with introducing a value-added tax in B.C., or undertaking any significant PST reform that is similar to a value-added tax, after the HST was rejected by the public in 2011,” read the report.
“We also recognize that if the intention is to reduce the impact of PST on business and to remain revenue-neutral that implies shifting the tax from business to individuals, which is likely to reduce tax-system progressivity. However, with appropriate low-income tax-credit increases and base-broadening, we feel that the tax system could be made more progressive and fair in the context of changes that enhance business competitiveness.”
The one item in the report that government does appear to be considering is increasing a low-income tax credit to ensure those who will earn a new $15-minimum wage by 2021 won’t have their gains clawed back by income tax.