Is the British Columbia HST Referendum Question Clear?
The HST referendum ballots have been mailed and must be returned and received by Elections B.C. by 4:30 p.m. on Friday, July 22, 2011.
The ballot asks:
Are you in favour of extinguishing the HST (Harmonized Sales Tax) and reinstating the PST (Provincial Sales Tax) in conjunction with the GST (Goods and Services Tax)?
Is this question clear? It is to me.
"Yes" means that the HST is will be gone (if there are a majority of "Yes" votes). A "Yes" vote means that British Columbia consumers will go back to a sales tax imposed under the Social Services Tax Act (British Columbia) and regulations passed by the government of British Columbia), which is provincial law. This means that the Government of British Columbia will have greater control over sales tax policy in British Columbia. The question ties the hands to the government to go back to the pre-July 1, 2010 provincial sales tax (called social services tax in British Columbia). However, it does not restrict the government of British Columbia's authority to change the law.
"No" means the HST will stay. A "no" vote is a vote to keep the harmonized sales tax that is imposed under the Excise Tax Act (Canada) and regulations set by the Government of Canada (actually the Department of Finance bureaucrats write the regulations and the federal Cabinet promulgates the regulations without House of Commons and Senate debate). The Canada Revenue Agency will continue to administer and enforce the HST in British Columbia.
A "Yes" vote means that the government of British Columbia has the power to reinstate the provincial sales tax at the rate of 7% (or higher in they choose). The sales tax base will shrink to the goods and services that were covered under the Social Services Tax Act (British Columbia) and regulations thereto. However, the sales tax base can be expanded by the Government of British Columbia if the majority of votes in the Legislature approves amendments to the Social Services Tax Act.
A "No" vote means that the HST rate will decrease from 12% (current rate) to 11% on July 1, 2012 and to 10% on July 1, 2014.
The irony is that with the HST, consumers have greater stability because tax changes must be applied at the federal level. Under he provincial sales tax system, the government of British Columbia can change the sales tax base and the sales tax rate at will. Consumers do not know what they will get in place of the HST. The referendum question says that the provincial sales tax will be reinstated. After reinstatement of the provincial sales tax, anything can happen.
So, the question is clear in my view. What will happen next is not clear. But, the Government cannot run a pro-HST campaign with the message "We can do whatever we want to you after the referendum results are in if you vote 'Yes". Would you like that? Vote 'No'".
Cyndee Todgham Cherniak is counsel to and in affiliation with the International Trade Law and the Tax Law (Commodity Tax
If HST is imposed under the Excise Tax Act (Canada) and regulations set by the Government of Canada, then how could BC lower it from 12% to 10%?
Cyndee's Comment: Good question. technically, B.C cannot lower the rate by passing an amendmetn to the law. However, pursuant to the CITCA, the British Columbia government can ask the government of Canada to change the tax rate (but only after the 2 year anniversary date of HST). If the government of Canada does not lower the rate as requested, depending on the circumstances, it may be in breach of its contract with B.C.