Business community, manufacturers paint gloomy post-HST picture

Old PST will need to be altered when it returns, business community insists.

VICTORIA -- Angry British Columbians delivered a seismic boot to the backside of the provincial government Friday, rejecting a tax dubbed crucial to B.C.'s future economy and likely scuttling any plans for an early election.

Just over 54 per cent of 1.6 million voters elected to dump the harmonized sales tax in a mail-in referendum forced by B.C.'s unique direct-democracy law.

As soon as the vote results were announced, grim-faced B.C. Finance Minister Kevin Falcon held a news conference to say the province would revert to the dual system of levying a provincial sales tax and a separate federal goods and services tax.

All the exemptions that had been in place with the PST -- no provincial sales tax on haircuts, restaurant meals or bicycles, for example -- would return in 18 months.

Business groups opined that with the old tax would come the old barriers to competitiveness, a reduced inability to create jobs and alarming uncertainty at a time when the world teeters on the brink of a double-dip recession.

Ontario's finance minister -- perhaps in an effort to nip any such tax revolt in the bud in his province -- appeared to bolster the predictions of competitive gloom by saying Ontario will benefit because business will find British Columbia less appealing than his province, where the HST was introduced to much less furor.

But opponents of the B.C. tax heralded the referendum results as a triumph of democracy, a humbling of a three-term government criticized for arrogance in assuming such a signifant tax change could be rolled out two months after a provincial election campaign in which it was never mentioned.

Former premier Gordon Campbell was forced to resign over the introduction of the tax and cabinet ministers have repeatedly apologized for the way it was introduced. Both Premier Christy Clark and Falcon did so again Friday.

"I'm obviously, as a finance minister, disappointed by the result but not all together surprised,'' Falcon told the news conference.

"We recognized when we started, from a place where 85 per cent of the public was opposed to the HST, in large measure due to our own handling of the introduction of that major policy change, that we had an uphill battle.''

But the gains in public opinion weren't enough, he acknowledged, before beginning to lay out the government's Plan B.

Falcon said the province will begin the process of restoring the PST by March 31, 2012, he said.

"We reserve the right to make some administrative changes, mostly of a relatively minor nature, mostly to just bring, as best we can, 60-year-old legislation into the 21st century,'' he said.

Clark had moved to make the HST more palatable by saying she would lower it to 10 per cent from 12 per cent by 2014.

She had mused after her leadership win earlier this year that she may call an election before the May 2013 fixed-election date, saying she would otherwise be governing for a long time without a mandate from voters.

On Friday, she was less enthusiastic.

"I'm focused on jobs. That's what I'm going to be focused on in the fall and I know you think about elections, perhaps more than I do,'' she told reporters.

"I'm going to be focused on jobs until May 2013 if that's when the election is held.''

The voting results showed only 25 of 85 B.C. ridings voted to keep the HST, and all of them are held by the governing B.C. Liberals. Many other Liberal-held ridings voted to reject the tax.

Former finance minister Colin Hansen's Vancouver-Quilchena riding voted heavily in favour of the HST, with 62.4 per cent wanting to keep it.

The highest support for the HST was in the West
Vancouver-Capilano riding, with 64.5 per cent support.

Traditionally strong NDP ridings in Surrey and East Vancouver generated the highest HST rejection counts.

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