01/11/2012 02:21 EST | Updated 03/12/2012 05:12 EDT

B.C. strikes 5-year deal to repay HST debt

The B.C. government has struck a deal with the federal government to repay its $1.6-billion HST bill over the next five years interest free.

"The full cost of the $1.6-billion repayment will still be booked in the provincial's government's 2011-12 fiscal year, but the province will instead be able to flow the cash over the coming five years," said a statement issued by the Finance Ministry on Wednesday morning.

The interest-free deal will save the province an estimated $100 million in interest, according to officials with the B.C. Finance Ministry.

"It's a real win for British Columbians. Obviously in a perfect world I wish we didn't have to pay back anything... But what we are trying to do is minimize the financial impact to the province and today's agreement does that," said Falcon.

Helmut Pastrick, the chief economist for the Central one Credit Union, says the deal is a good one for B.C.

"Obviously, the federal government made some accommodation for B.C.," said Pastrick.

Vander Zalm slams deal

But the deal was condemned by the opponents of the HST, who organized the referendum eventually struck down the tax.

Fight HST Leader and former premier Bill Vander Zalm said the federal government "had taken the B.C. Liberals to the cleaners with an embarrassing deal that will cost British Columbians hundreds of millions more than the already painful HST.

“Why on earth is B.C. agreeing to payback the full $1.6-billion grant from Ottawa when we will have fulfilled three years of imposing the HST of the five-year agreement by the time it ends?” said Vander Zalm in a statement issued on Wednesday morning.

“That means B.C. should only be repaying about 40 per cent of the grant when the HST is gone in 2013 — not 100 per cent — what incompetence,” Vander Zalm said.

But Falcon said the idea of not paying back part of the $1.6 billion was "not acceptable" to the federal government.

The B.C. government is required to repay the cash transfer from the federal government after it agreed to end the unpopular tax following a referendum last year.

The next move will be for the governments to issue transition rules for the return to the PST and GST, and end much of the uncertainty around sales tax in B.C. The transition is expected to be completed by March 2013, Falcon has said.

The deal comes as B.C. Finance Minster Kevin Falcon prepares the province's first complete budget since residents voted to cancel the tax.

During the September fiscal update, Falcon said the province's deficit had tripled because of the rejection of the HST. Scrapping the HST will cost the province $2.3 billion over three years but the government still intends to balance its budget by 2014, he said in September.