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B.C. returns to old sales tax after HST rejection

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VICTORIA - Monday marks British Columbia's official return to the provincial sales tax after an almost five-year crash-and-burn relationship with the harmonized sales tax.

Introduced in 2009 as a saviour for business, but rejected in a historic peoples referendum in August 2011, the HST managed to cling to the province's political, social and business fabric until now — taking with it former premier Gordon Campbell and possibly the current Liberal government of Premier Christy Clark as victims.

British Columbians go to the polls on May 14, with the Opposition New Democrats, who called the HST a $2 billion transfer of wealth from consumers to businesses, expected to form the next government.

Businesses are now grudgingly forced to return to the former seven per-cent PST after taking the past two-and-a-half years getting used to the simplified, value-added HST, which combined the five-per-cent federal goods and services tax with the PST.

Former B.C. finance minister Kevin Falcon once referred to the PST as a "stupid tax," for its complications and exemptions, but he was one of many Liberals quick to admit the government employed a bone-headed strategy to sell the HST to British Columbians.

Barely three months after winning its third consecutive term in May 2009, Campbell's Liberal government announced it had accepted Ottawa's $1.6 billion offer to move to a harmonized federal-provincial tax system.

The announcement was viewed with skepticism, especially since B.C. had consistently rejected previous federal offers to move to the an HST.

The federal cash offer and the potential gold mine for business now appealed to Campbell's Liberals who were virtually silent on the HST in the past, but now faced a massive budget deficit voters didn't know about during the election campaign.

Almost immediately, a grassroots Fight-HST movement began, enlisting former premier Bill Vander Zalm as a spokesman, while more than 500,000 people signed up to oppose the tax, prompting a provincewide referendum on the HST under B.C.'s direct democracy laws which allow for recalls of politicians and votes on some initiatives.

Campbell resigned mid-term, essentially admitting peoples concerns about his policies had stalled the progress of his government.

The tax went down to defeat in August 2011, but it's taken until now to officially bring back the PST.

B.C.'s small business minister Naomi Yamamoto said she has some concerns that not every business has properly registered to move to the PST for April 1, but for the most part, it will be business as usual.

"We will see all those permanent exemptions prior to the HST reintroduced," she said. "So, people will not be paying PST on things like gym memberships and restaurant meals, bicycle purchases, haircuts. But for the majority of purchases some may make they will probably see no difference at all."

Yamamoto said about 25,000 businesses have yet to register to collect the PST. She said about 100,000 B.C. businesses, mostly retailers, will collect the PST.

She said the Finance Ministry has undertaken to contact every eligible business about their need to sign up and how they can do it on line or through consultations.

She said the ministry has made more than 115,000 calls to businesses, written to each business twice and conducted almost 2,000 personal consultations with businesspeople.

"There's no provision, regrettably, in the legislation for leniency," said Yamamoto. "So businesses really are obligated if they are selling a product or service that attracts the tax, they have to collect it. But it's not the Ministry of Finance's intent to audit all of these businesses."

She said the ministry wants to help speed the process in any way it can.

B.C. chamber of commerce president John Winter said he believes the majority of businesses will be signed up by April 1, but he expects in-store issues in the first few days as customers examine their receipts to see if they were charged taxes or not charged.

"My sense is it's going to be chaotic," he said. "There's going to be a lot of cash register discussions."

The provincial government struck a deal with the federal government to pay back the $1.6 billion in the months after the HST was defeated in the referendum.

The money will gradually be returned over the next five years, interest free.

Falcon said at the time that getting a break on the interest would save the province $100 million.

"Obviously, in a perfect world, I wish we didn't have to pay back anything," the minister told reporters in January last year as he announced the agreement.

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