Why? Why would growth be higher when the cost of capital, and the cost of producing/selling goods is higher?
How do you sell these products when you take money away from the consumer? It is quite simple, you take money from the poor and give it to those who don't need so they can send it offshore.
Explain to me why BC has grown quite well without the HST and tell me what fiscal problem is it solving?
The following is a second independent post and not a reply to Paul.
Vander Zalm: Who paid for the misleading report?
FightHST
Delta – The once proudly independent Fraser Institute’s recently published report on the HST is so filled with holes it brings into question the credibility of the entire organization, says former BC premier and Fight HST Leader, Bill Vander Zalm.
Vander Zalm says the report is revealing as much for what it didn’t analyze as for the errors and sloppiness contained in what it did look at.
“For starters, how can a ‘think tank’ publish a paper about such a sweeping tax change without ‘thinking’ about anything but the positive aspects of the tax? Right there you have to question their objectivity.”
Vander Zalm says there are volumes of information regarding the pros and cons of value added taxes in Europe. He says for any report to be credible, it would need to at least address problem areas associated with such taxes.
“The Fraser Institute Report does not even give a cursory glance to such things as VAT (HST) evasion and the underground economy which has resulted throughout Europe from the tax. They didn’t address the inflationary aspects of VAT’s, or the fact that there is very little embedded sales tax on services, which is the main area where HST will add to costs.”
“They also tried to gloss over the shift in tax policy to a regressive tax like the HST and its enormous impact on low income people by saying high income earners will pay more. But they aren’t comparing the tax burden relative to income level, so their conclusions are meaningless.”
“Perhaps most importantly, they avoid the issue of BC handing its taxation authority over to Ottawa and losing control of tax policy. The Fraser Institute is not simply advocating for a more efficient tax system, which could be achieved with a reformed PST.
By failing to distinguish between a reformed PST and the HST, they are also advocating that BC relinquish its sovereign authority over sales taxes to Ottawa. It makes you wonder who paid for this ‘report’,” said Vander Zalm.
Vander Zalm says a Statistics Canada report shows the HST burden on consumers to be significantly higher from the tax. But he says even the Stats Can report is based on the same flawed model as the Fraser Institute Report. He says both reports assume a model where business will pass on significant savings to consumers from the input tax credits in the HST.
“This idea is based more on wishful thinking, hoping, and wanting than on reality. Very few businesses have any significant amount of embedded PST in the cost of their services. Certainly not equivalent to the extra 7% they will now have to charge in tax. The HST’s greatest impact will be on services, where PST was not previously applied.”
Vander Zalm says that means very little PST cost savings resulting from the move to an HST are available to be passed on to consumers.
Vander Zalm says his group did an internal analysis of the Fraser Institute’s Report, and found the following discrepancies:
The report estimates an amount of $3,133 PST paid yearly for 2011 and $3,279 for 2012. Assuming these figures refer to the amount of PST an average family pays on a current basket of goods (the report does not define the numbers coherently) the PST numbers are extremely inflated.
To achieve such PST averages, the average family making $86,862 would have to purchase $44,757.14 in PST(able) goods for 2011, and $46,842.86 PST(able) goods for 2012.
The Fraser Institute also calculated income tax at $11,245 for the same average family.
Federal and Provincial income taxes paid on a gross income of $86,862 would be $28,208.06 (Fed $16,438.58 + Prov $11,769.48 = $28,208.06). This means the Report deliberately left out the federal portion of income tax.
Considering the current PST tax structure which is based on paying tax on limited goods and no tax on services, the Fraser Institute’s numbers are unsupportable, as follows:
Approximate net income on the average family earning $86,862 is roughly $58,653.94 (left to spend on all their household needs.)
According to the report, from this net of $58,653.94, $44,757.14 is spent on PST(able) goods. That leaves $13,896.80 spent on non-PST(able) goods which include: Mortgage, utilities, most food products, most services, and other taxes (Fraser Institute table #3 item page 2).
Using their own numbers with the correct income tax amounts, individuals can’t possibly spend $44,757.14 on PST(able) items.
The Statistics Canada Report’s estimate of the net HST cost to consumers of $1.5B also contradicts the Fraser Institute Report’s underestimated net HST of $410M, which is the same figure proposed by the BC Government.
Vander Zalm says in order for all BC consumers to have a net HST hit of only $410M, business would have to pass on a savings equivalent to 80% of the net tax increase from the HST on all their goods and services. “Not going to happen,” said Vander Zalm.
Vander Zalm says the Fraser Institute report is a sham designed to support the government version of the HST.
“The evidence for that is found in the absurd equations used to calculate PST, the ridiculously low estimate of net HST to be paid by consumers, and the fact the report was released just 9 days before the HST is set to take effect.”
“When was the last time a major think tank offered their thoughts after something was a foregone conclusion? What could possibly be the point of such a report other than to prop up a shaky government and it’s failing policy initiative?” Vander Zalm asked.
