Hey there, time traveller!
This article was published 23/8/2009 (2500 days ago), so information in it may no longer be current.
The leaders of Manitoba's opposition parties are correct to be concerned that a proposal to blend the GST and PST into a single harmonized sales tax could prove to be nothing more than a cash grab by a Doer government desperately seeking lucre. But that said, why throw the baby out with the bathwater? Why not see the proposal as an opportunity and formulate a better alternative outcome? Why not, as the Free Press argues, harmonize the taxes and dedicate increased revenues to a fund that would reduce municipal infrastructure deficits and create property tax savings?
One reason Conservative Leader Hugh McFadyen and Liberal Leader Jon Gerrard might not be articulating alternatives was underlined by Mr. Gerrard. He noted that Finance Minister Greg Selinger has been looking at the issue for a decade and must by now have an extensive file on HST, and a thorough analysis of the impacts that would result from harmonization. Mr. Selinger should release that analysis so that an informed and reasoned debate can take place. In the absence of the information, it is understandable that critics -- and those are lining up more on the left than the right -- will leap to irrational conclusions.
Mr. Selinger also should release a complete analysis for political reasons. This government has long been an opponent of HST and it certainly has no mandate from the last election to introduce one before the next election. It could, however, do so by persuading Manitobans that it is the right thing to do. And to do that, Manitobans must have the same facts set before them that Mr. Selinger has.
Mr. Selinger, in fact, need look no further than B.C., where the government unveiled its HST plan two months after an election in which it was not raised, to see the kind of political turmoil and righteous anger that results when the electorate believes it is being had.
Mr. Selinger has hinted at one reason -- the most important one -- for his changing course on HST. It is that in opting to implement an HST, British Columbia and Ontario have joined all of Canada outside the Prairies in removing the tax from the cost of business inputs as a means of increasing economic performance, jobs and wealth.
That doesn't mean that Manitoba should simply play follow the leaders, but it certainly does mean that if Manitoba does not follow the leaders, Manitoba businesses will be at an unfair disadvantage relative to most of the rest of Canada.
How big a disadvantage? No one can say until Mr. Selinger lifts the gag on the information. But a Business Council of British Columbia study found that 40 per cent of PST collected on the West Coast comes from business, a total of about $2 billion of $5 billion collected, and at that it is not collected evenly from business but rather according to how many taxable inputs each is required to purchase to make a product.
If the same conditions apply in Manitoba (something Mr. Selinger could tell us today) then Manitoba businesses are paying about $640 million in PST, and will be at a $640-million disadvantage when harmonized regimes come into effect in Ontario and B.C. next year.
Will elimination of PST on business inputs lead to investment and job creation in Manitoba? We can't know without access to the analysis. But we do know that an analysis in three Atlantic provinces found that business investment in capital stock rose 12 per cent in the years after harmonization was introduced in 1997.
Will harmonization lead to a seven per cent increase in all PST-exempt goods and services? Can't say and Mr. Selinger has not shared that information. But other jurisdictions have exempted some of the same items under HST as they had under PST and have implemented or will implement offsetting tax-credit and tax-reduction measures.
In addition, studies done in Quebec and the Atlantic provinces found that price reductions were passed on "surprisingly quickly" to consumers as a result of competition.
But Manitobans need to know what might happen here, not what might be gleaned from elsewhere. Mr. Selinger should fill the information gap by releasing his analysis of what an HST could mean for Manitoba.