Province can no longer tip-toe around tax reform: report

Business Council of BC paper proposes value added tax in lieu of failed HST 

"Whether a revamped sales tax option is too close to the HST is something that voters and politicians have to decide," say Kevin Milligan, author of Business Council of British Columbia report.

Despite the sour taste that remains from the failed harmonized sales tax, B.C. remains in dire need of tax reform, says a new report from the Business Council of British Columbia.

Kevin Milligan, the report’s author, said the province needs to broach this prickly subject once again to ensure future financial stability.

“Whether a revamped sales tax option is too close to the HST is something that voters and politicians have to decide,” he said in an email response to Business in Vancouver. “I just hope that we can still talk about reforming the PST while respecting the HST referendum mandate.”

The report, titled Fiscal Options for Building a Prosperous British Columbia, proposes a B.C. value added tax (BC-VAT), which is similar to the HST in some respects, but differs in others.

“The BC-VAT would be billed directly to businesses, not levied directly on consumers,” said Milligan, a professor of economics at University of British Columbia’s Vancouver School of Economics. “To the extent this was passed through to higher prices, it might end up as close to the same net impact, but the visibility would be very different. The other main difference is that B.C. could control what is taxed and what is not, without having to negotiate with Ottawa.”

Milligan noted his report has been passed along to the B.C. tax competitive commission, which will be chaired by economist Bev Dahlby. The commission’s mandate is to make business more competitive in global and national markets while analyzing tax fairness.

Originally announced in February with the provincial budget, the commission was created to modernize British Columbia’s aging tax policy, which includes a PST first implemented back in 1948. Former premier Bill Vander Zalm led a referendum in 2011 to overturn the province’s HST—which replaced the PST—a mere 13 months after its adoption.

Milligan noted in the report the global economy is shifting, becoming more competitive and complex, which adds cost pressures to employers and governments across the country.

“British Columbia is competing in a world where capital is fleeting, consumer purchases are being facilitated through technology and data, healthcare costs and social services expectations are rising and the provincial economy is tilting in favour of the services sector.”

- with files Albert Van Santvoort