BUSINESS
05/25/2011 04:19 EDT | Updated 07/25/2011 05:12 EDT

B.C. Promises 2% HST Cut By 2014

(CBC)--The B.C. government is proposing to cut the HST by two percentage points by 2014, send out cheques to families and hike corporate taxes, if British Columbians vote to keep the tax in a critical referendum this summer.

Finance Minister Kevin Falcon announced on Wednesday morning the government will reduce the HST by one percentage point in July of next year and then another point in July of 2014, cutting the tax from 12 to 10 per cent.

The government will also issue transition cheques to all B.C. families with children under 18. The one-time payments of $175 per child will offset increased HST costs before the first cut takes effect next year.

There will be similar payments to low and modest income seniors, meaning the average B.C. family will pay $120 a year less in tax under the 10 per cent HST when compared with the old 12 per cent PST/GST combination, the finance ministry said.

In addition, the government will increase the general corporate income tax rate to 12 per cent from the current 10 per cent on Jan. 1, 2012, and postpone the reduction in the small business tax rate planned for April 1, 2012, said the ministry.

Report found HST costing families

The announcement comes less than one month before the ballots for the HST referendum are mailed out to B.C. voters on June 13. All ballots must be received by July 22 to be counted.

The move also comes after an independent report found the HST had increased the tax burden on the average family by $350 a year, although low income families are actually paying less.

The report also found that the HST has shifted a greater share of taxes from business to individuals and families and that the government was taking in more than $820 million a year in revenue than it would have under the older PST/GST.

Before the changes were announced, the government also conducted an online poll asking taxpayers how they'd feel about a variety of possible tax-relief measures.

Currently, the HST is in B.C. is 12 per cent, one per cent lower than the 13 per cent HST in many provinces.