04/01/2013 01:42 EDT | Updated 03/31/2014 11:59 EDT

BC HST Cost Restaurants $1.5 Billion: Group


VANCOUVER - The harmonized sales tax has been wiped out in British Columbia, and the provincial sales tax is back in force, but business leaders remain at odds over whether the change is good or bad for the province's economy.

The restaurant sector said Monday it was delighted to return to the lower tax, an announcement that was quickly followed by concerns from the Business Council of British Columbia saying the switch will hurt the province's competitiveness.

Observing that debate were former B.C. premier Bill Vander Zalm, an architect in the fight against the HST, and B.C. NDP Leader Adrian Dix — two leaders who heralded the reversion back to the PST as a triumph for democracy.

"We were able to practise democracy in a way like it's never (been) done before in Canada or in the British Commonwealth of nations," said Vander Zalm. "This was a first. It was historic."

The HST's official passing came Monday, almost four years after the Liberal government announced it had accepted $1.6 billion from the federal government to switch over to a harmonized federal-provincial tax system.

Public outcry and protest followed the introduction of the tax, which combined the five-per-cent federal goods and services tax with the seven-per-cent PST, and it was defeated in an August 2011 referendum.

"HST cost B.C.’s food service industry a total of $1.5 billion in lost sales," said Mark von Schellwitz, of the Canadian Restaurant and Foodservice Association, in a statement issued Monday.

While the HST was on the books, the restaurant industry grew at just 1.4 per cent in B.C., he added, noting the sales growth for the industry in the rest of Canada was 11.5 per cent.

Von Schellwitz said he expects the industry now to grow about 5.1 per cent this year thanks to the seven per cent tax savings and a reduction in liquor markups.

That’s good news for British Columbia’s third largest private sector employer,” he added, noting customers will now pay less to eat out.

But the Business Council of British Columbia was not pleased, saying the change back to the PST "represents the single biggest tax increase on business in the province’s history" and will be a significant blow to the province's competitiveness.

The organization said that under the HST, businesses received offsetting tax credits for all sales tax paid on items such as machinery, computer equipment, vehicles, legal services, purchased energy, furniture and fixtures, and construction materials, but those tax credits won't be available now.

The business council noted 40 per cent of the PST's revenue will be paid directly by businesses — costs competitors outside of B.C. don't have to pay — and as a result goods and services produced in the province will be more expensive, especially with the high Canadian dollar taken into account.

"Restoring the PST, and doing away with the value-added sales tax system created by the HST, will increase production and operating costs for B.C. businesses as a whole by roughly $1.5 billion per year," said Jock Finlayson, a business council spokesman.

"On top of this is another $150 million of additional compliance and administrative costs that will fall on the shoulders of B.C. businesses due to the loss of the benefits from sales tax harmonization with the federal GST.”

Finlayson said the provincial government needs to review the province's competitiveness and examine other taxes, fees, levies and policies that impact the cost of doing business and investment.

Reflecting back on the referendum victory, though, Vander Zalm said the battle to dump the tax was the most rewarding thing he's ever done because it crossed philosophical and political lines and united people.

"They worked for a common cause," he said. "There were no fights, no arguments."

Dix said the NDP would not revive the HST if the party forms government.

"I don't intend to bring it back," he told reporters in Vancouver. "This was a tax transfer on the middle class."

He said the HST has damaged the B.C. economy on the way in and on the way out and disrupted every business and consumer in the province during the past four years.

Like Vander Zalm, Dix said people should celebrate because they engaged in democracy, knocking on doors and visiting shopping malls to gather signatures for the petition to dump the tax.


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